Stop non-priority spending, Treasury warns ministers

Spending that does not contribute to the government’s priorities should be stopped, the Treasury will tell ministers as Chancellor Rachel Reeves promises to take “an iron fist against waste”.

As part of a spending review covering up to 2029, Reeves will ask departments to identify efficiency savings worth 5% of their current budgets.

Department budgets will also be scrutinised by panels, including former senior bankers, to advise on what spending is necessary.

The Conservatives say Reeves either “hasn’t got a grip on her own departments or hasn’t worked out how she is going to make Labour’s sums add up without coming back to the country with more taxes and more borrowing”.

Shadow Treasury minister Richard Fuller said: “Delivering value for money for the taxpayer is a noble goal.

“But Rachel Reeves’ record so far has been to dole out inflation busting pay rises to Labour’s union paymasters whilst mandating nothing in return, and making no reforms to public sector productivity or welfare spending.”

The Liberal Democrat Treasury spokesperson, Daisy Cooper, urged the government not to make cuts to social care, warning that it would be a “false economy that will only put people at risk and damage the public finances”.

She said billions of pounds could be “saved in the NHS budget by investing properly in social care”.

Setting out the details of its spending review, the Treasury said: “Departments will be advised that where spending is not contributing to a priority, it should be stopped.”

“Every single pound the government spends will be subjected to a line-by-line review to make sure it’s being spent to deliver the Plan for Change and that it is value for money,” it added.

Last week, Prime Minister Sir Keir Starmer set out his Plan for Change including the six milestones he wanted to meet before the next election.

These include putting more money in the pockets of working people, building 1.5m homes in England and treating 92% of NHS patients within 18 weeks.

The Treasury says the chancellor will “work with departments to prioritise spending that supports the milestones to deliver the plan”.

Department budgets will also be reviewed by panels, including former senior management at Lloyd’s Banking Group, Barclays Bank and the Co-operative Group working alongside experts from think tanks, academics and others from the private sector.

The Treasury says the panels will “bring an independent view to what government spend is or isn’t necessary, with a mixture of expertise from local delivery partners, think tanks, academic experts and private sector backgrounds”.

“The previous government allowed millions of pounds of taxpayers’ money to go to waste on poor value for money projects,” said Reeves.

“We will not tolerate it; I said I would have an iron grip on the public finances and that means taking an iron fist against waste.”

As an example of the type of programme the government intends to cut, the Treasury pointed to a scheme which placed social workers in schools.

It said the programme had cost £6.5m but an evaluation had found no evidence of “positive impact on social care outcomes”.

In her Budget in October, the chancellor announced £40bn in tax rises, much of which will hit business.

At the time, Reeves said it was “not the sort of Budget we would want to repeat” but argued it was necessary to fill a £22bn “black hole” in the public finances left by the previous Conservative government.

She has since said she will not need to raise taxes to “top up” public spending.

Last week, the prime minister said: “I don’t want to suggest we’re going to keep coming back for more because that isn’t the plan.

“What I can’t do is say to you there are no circumstances unforeseen in the future that wouldn’t lead to any change at all.”

“If you look at Covid and Ukraine,” Sir Keir added, “everyone knows there are things we can’t see now, but I can tell you our intention was to do the tough stuff in that Budget, not keep coming back.”