Chancellor of the Exchequer Darren Jones on Tuesday launched a six-month “line-by-line” review of the UK's £1.2 trillion public spending, equipped with a new device to keep ministers in line: a “dashboard” that starts flashing at them if they blow their budget.
Ministers will need to bring their spending plans within limits that some economists believe will be very difficult to achieve without imposing further cuts to key public services.
“There's a dashboard that starts flashing for them if they write too much money against their budget,” Jones told the Financial Times.
“It tells them they have forgotten about their budget, as well as how much we will have to pay in taxes to pay for the extra spending,” he said, adding that there would be no new taxes to bail out ministers.
Tuesday, Jones He has written to all ministers insisting that the “spending envelope” set out for the rest of MPs in the October Budget presented by Chancellor Rachel Reeves has been sealed.
He said this review would be the first “zero-sum” study of every government program since Labor minister Alistair Darling conducted such a study in 2007.
Launching the review with Reeves at a hospital in Maidstone, Jones said it would also include engaging business leaders to help advise on waste, as well as listening to consumers and producers of public services.
The spending review, which will end in June next year, sets public spending benchmarks for the rest of Parliament, covering three years of current spending from 2026 to 2029 as well as a five-year program of capital spending.
Sir Keir Starmer wants the exercise to focus on the priorities he set out last week, covering rising living standards, housing, hospital waiting lists, early years education and crime. National security and immigration processing are also considered “core” tasks.
The Treasury said Jones would tell ministers that “when spending does not contribute to a priority, it should be stopped”.
The scramble for cash will be intense. Reeves front-loaded public spending in her budget, notably through a two-year £26bn cash injection into the NHS. But from 2026 to 2027, total spending will increase by only 1.3 percent in real terms annually.
Paul Johnson, Institute for Fiscal Studies, He warned This will almost certainly “involve uncomfortably tight compromises for many public services”, especially with pressures for increased spending from the NHS, defense and education.
But Jones insisted the settlement was “certainly not austerity” and that he expected his review to eliminate waste. Ministers are asked to set efficiency savings at 5 per cent of their budgets in future years. Reeves promised to use an “iron fist” against waste.
Asked whether it would be too tough for spending departments, Jones said: “It always has to be tight if you're spending public money.” But he said the point of the exercise is to look at how the money could be better spent, not why more money is needed.
This does not mean deprioritizing key services that are already struggling, such as social care, local government, courts or prisons, said Jones, a former lawyer and former chairman of the House of Commons Business Committee. He added: “We are not closing prisons.”
Key to Jones' plan is mobilizing private sector expertise to study departmental spending plans, including bringing in non-executive directors from the private sector who already work in Whitehall.
But he said it was up to each department to develop its own “external challenge” team, drawing on the private sector, external bodies and academics, as well as drawing on the views of users and producers of public services.
Alan Melbourne, Labour's former health secretary, is involved in the NHS reform plan, while the Treasury said external experts with business experience including Lloyds Banking and Co-operative Group would take part.
They are expected to include Carina McTeague, a non-executive director in the business division, and former co-op chief executive Richard Pennycook, who is the key non-executive director in the education division.
“We want each department to identify who are the best people to bring a culture of challenge to the decision-making process,” Jones said.
He added that ministers from different departments would be brought together to break down Whitehall's “silos”. “We're doing it in a more open way. If there are trade-offs between departments, we should talk about that.”
He added: “The debate is always about the growth rate, but not about how best to use the £1.2 trillion you are spending. We need to review that line by line and make sure that is spent in the best possible way.”
Pressures on the spending budget will be severe, especially due to the government's pledge to increase defense spending from 2.3% of GDP to 2.5%, to help confront the threat posed by Russia.
Jones said the defense review in the spring would set the “date and path” by which military spending would be increased towards the new target.
He's adamant that Reeves will do it Don't raise taxes To increase public spending later in parliament – repeating a pledge she made at the CBI's business conference. The hope is that growth and efficiency will help ease spending pressures.
“The envelope has been set for this Parliament,” he said. “We've been very clear about that.”
