Treasury chief secretary Darren Jones on Tuesday launched a six-month “line by line” review of £1.2tn in UK 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 input their spending plans within limits that some economists believe will be extremely hard to achieve without forcing further cuts on key public services.
“There’s a dashboard that starts flashing at them if they type in too much money for their budget,” Jones told the Financial Times.
“It tells them that they’ve blown their budget and also how much we would have to put up taxes to pay for the extra spending,” he said — adding there would be no new taxes to bail ministers out.
On Tuesday, Jones wrote to all ministers insisting that the “spending envelope” laid out for the rest of the parliament in chancellor Rachel Reeves’ October Budget was locked down.
This review will be the first “zero based” study of every government programme since Labour chancellor Alistair Darling conducted such an exercise in 2007, he said.
Launching the review with Reeves at a hospital in Maidstone, Jones said it would also involve roping in business leaders to help advise on waste, as well as hearing from consumers and producers of public services.
The spending review, which will conclude in June next year, sets the parameters for public spending for the rest of the parliament, covering three years of current spending from 2026-29 as well as a five year programme 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 tackling migration are also “foundational” tasks.
The Treasury said that Jones would tell ministers that “where spending is not contributing to a priority, it should be stopped”.
The scramble for cash will be intense. Reeves front-loaded public spending in her Budget, notably with a £26bn two-year cash injection into the NHS. But from 2026-27 the overall spending envelope will increase by just 1.3 per cent in real terms a year.
Paul Johnson, of the Institute for Fiscal Studies, has warned that “would almost certainly involve uncomfortably tight settlements for many public services”, especially with pressure for higher spending from the NHS, defence and education.
But Jones insisted the settlement was “definitely not austerity”, and that he expected his review to root out waste. Ministers are being asked to identify efficiency savings worth 5 per cent of their budgets in the years ahead. Reeves has promised to deploy “an iron fist” against waste.
Asked whether it would be very tough for spending departments, Jones said: “It should always be tight if you’re spending public money.” But he said the exercise was intended to look at how money could be spent better, rather than why more money is needed.
Jones, a former lawyer and previously chair of the Commons business committee, said that did not mean deprioritising key services that are already suffering, such as social care, local government, the courts or prisons. “We are not closing prisons,” he said.
Key to Jones’s plan is to mobilise private sector expertise to examine departmental spending plans, including using non-executive directors from the private sector already working in Whitehall.
But he said it would be up to each department to develop its own “external challenge” team, drawing on the private sector, outside bodies and academics, as well as drawing on the views of the users and producers of public services.
Alan Milburn, former Labour health secretary, is involved in the NHS reform plan, while the Treasury said external experts with experience at businesses including Lloyds Banking Group and the Co-op would be involved.
They are expected to include Karina McTeague, a non-executive director at the business department, and former Co-op chief executive Richard Pennycook, who is the lead non-executive director at the education department.
“We want every department to identify who the best people could be to bring in a culture of challenge to decision making,” Jones said.
Ministers from different departments would be brought together to break down Whitehall “silos”, he added. “We are doing it in a much more open way. If there are trade offs between departments, we should talk about that.”
He added: “The debate is always about the rate of growth, but not about the best way to use the £1.2tn you are spending better. We need to go through that line by line and make sure that’s being spent in the best possible way.”
Pressures on the spending budget will be intense, not least because of a government pledge to increase defence spending from 2.3 per cent of GDP towards 2.5 per cent, to help counter the threat posed by Russia.
A defence review in the spring would inform the “date and trajectory” by which military spending would be increased towards the new target, Jones said.
He is adamant that Reeves will not raise taxes to top up public spending later in the parliament — repeating a pledge she made to the CBI business conference. The hope is that growth and efficiency savings will help to ease spending pressures.
“The envelope has been set for this parliament,” he said. “We’ve been very clear about that.”