Angela Rayner’s department is one of the most vulnerable to cost-cutting as Rachel Reeves prepare to try and lower spending, reports have suggested. The Deputy Prime Minister is in charge of the Ministry of Housing, Communities and Local Government (MHCLG), which could be impacted as the Chancellor seeks to stick to her “iron-clad” fiscal rules. Ms Reeves confirmed at the weekend that she plans to cut Government running costs by 15% by 2030, and some parts of the Whitehall machine could be more impacted than others.
The Government’s first multi-year spending review is due to be published in June, and will set out departmental budgets between 2026/27 and 2028/29. On Sunday, the Chancellor said there will be “real-terms increases in government spending in every year of this Parliament”, but she did not confirm in an interview with the BBC if this would apply to unprotected departments, which also include justice, culture and trade, saying this would be set out in the spending review in June. Every department, Ms Reeves added, had been asked to rank their spending from most important to least.
She said: “We want to put more money into the things that are the most important things for voters, for citizens, and less money on the things that are just not necessary or we should be doing in a different way.”
The Institute for Government has highlighted that the spending plans set out in Ms Reeves’ October budget beyond 2025/26 were “tight”.
Its analysis has shown that, after a large increase in spending in 2025/26, funding for unprotected departments was due to fall in real terms between 2025/26 and 2029/30.
The thinktank added: “We estimated that would mean that funding for police, criminal courts and prisons would fall by 1.3% per year in real terms in those years.
“Funding for local government would increase, but only by 1.2% in real terms per year, driven almost entirely by rising levels of council tax. Most of that increase will be swallowed by rising demographic pressure.”
The IFG highlighted that, since then, economic developments mean those cuts are likely to be deeper still.
It wrote: “If the OBR raises its forecast for inflation over the rest of this spending review period, as seems likely, it will further erode real-terms departmental settlements unless the cash numbers are topped up.
“Another big change since the budget has been the commitment to increase defence spending to 2.5% of GDP by 2027, however the roughly equal reduction in the aid budget means this will have no impact on the overall spending envelope or other departments.”
The resulting settlements, experts warn, would make it difficult for ministers to increase performance across public services before the next election, as Sir Kier Starmer promised.
“So a key question for the chancellor will be whether to re-open the envelope she set last autumn,” the IFG said.