Treasury Minister Warns Some Departments Face Real-Terms Cuts At Spending Review

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The government will have to make "difficult decisions" at next year's Spending Review to stick to its fiscal rules, leaving some departments facing real-terms cuts, the Chief Secretary to the Treasury has said.

“There will be some big choices and some difficult choices at the Spending Review.

"Not all departments will see real-term increases, but obviously that is for next year, and we have to do those things in the round," Emma Reynolds told PoliticsHome podcast The Rundown.

Reynolds, Labour MP for Wycombe, spoke to the podcast a day after Chancellor John Healey delivered the Andy Burnham government's first Budget on Wednesday.

In the interview, which will be published on Friday, the Treasury minister denied claims that the government ducked major spending decisions in that Budget.

The Institute for Fiscal Studies think tank said on Tuesday that the Burnham government failed yesterday to provide details on how exactly it plans to fund several "big areas" like defence, social care, welfare and youth unemployment.

On defence, Reynolds said money was already being moved away "from certain big projects" to help the government meet its target of raising spending to 3 per cent of GDP by 2030.

“We took some tough decisions yesterday across government departments to reallocate spending away from certain big projects towards defence.

“And as the Chancellor confirmed, we have set a target date for 3 per cent by 2030. That will require further reprioritisation across government, and that really can only be done in the Spending Review," she told PoliticsHome.

At the Spending Review, which will take place some time next year, the Labour government will confirm how it plans to allocate spending across departments, against what is expected to be a backdrop of tight economic constraints.

It will reveal policy areas Burnham wants to prioritise ahead of the next general election, as well as those that will miss out on investment.

Reynolds told The Rundown that "fiscal discipline underpins everything we do", adding that the geopolitical pressures facing the UK economy are "much" worse than they were when Labour entered office over two years ago: "We're in a very difficult situation internationally, much more so than was the case in 2024.”

Speaking in the House of Commons on Wednesday, Healey described the Budget as a package of measures providing "breathing space" for voters in difficult economic times.

It included steps to further address cost-of-living pressures, including a direct £100 payment to around 20m households in the coming weeks to help with the cost of energy, and the removal of standing charges from energy bills.

However, the Chancellor also sought to stress that "global economic storms" like the impact of the war in Iran are putting strain on the UK economy.

The Rundown is presented by Alain Tolhurst, and is produced and edited by Lulu Goad and Ewan Cameron for Podot