Keir Starmer is currently facing a potential revolt within his cabinet over significant budget cuts of up to 20%, as revealed by The Independent. This backlash comes as Chancellor Rachel Reeves prepares to unveil her first Budget and grapples with the challenge of finding £40 billion in spending cuts and tax increases by the upcoming October 30 deadline. During a recent Cabinet meeting, senior ministers expressed their concerns about the proposed cuts, with some departments possibly facing reductions as high as 20%.
Despite earlier pledges of “no return to austerity” under Labour, Reeves informed ministers that the allocated funds would only be sufficient to maintain public services at their current levels. The pressure to secure an additional £18 billion in funding to support the NHS and prevent cuts to key departments has created tensions within the cabinet. Some ministers, including Deputy Angela Rayner, Justice Secretary Shabana Mahmood, and Transport Secretary Louise Haigh, have reportedly penned letters to the Prime Minister expressing their apprehensions.
As the Budget deadline looms closer, the spotlight is on Reeves to finalise the details amid mounting opposition from within the cabinet. Experts have cautioned that without finding £20 billion to safeguard “unprotected” departments, coupled with additional investments, tax increases will likely be unavoidable. Despite concerns over potential tax rises, Reeves is said to be considering raising capital gains tax on the sale of assets, excluding second homes, to generate additional revenue, while also contemplating an increase in the employer rate of national insurance.
Former Bank of England Governor Mervyn King has advised Reeves to be transparent with the public and consider tax hikes as a necessary step to address the economic challenges. The looming Budget announcement has sparked debates over Labour’s manifesto promises and the need for tough fiscal decisions. Amidst these challenges, Downing Street has emphasised the importance of honesty with the public regarding the economic situation inherited from the previous government. The Treasury has been contacted for further comments on the ongoing developments.