The Treasury has now agreed public spending settlements with all departments ahead of next week’s budget, chancellor Rachel Reeves has said.
This follows reports last week that some ministers had raised concerns with Keir Starmer over the amount of spending cuts needed to meet the Treasury’s proposed spending limit.
Reeves told BBC Radio 5 that departments’ budgets have now been settled, with the now-traditional popping of balloons process complete.
Asked about the tradition, Reeves said: “This is not a tradition started by this chief secretary, [but] by a previous chief secretary, I’m not sure how many ago, where at the beginning of the [budget] process, balloons are blown up, all stuck to the wall in the office and as settlements are agreed, the balloons are burst. And all you need to know that is there are no balloons left in the chief secretary’s office.”
No.10 confirmed last week that the total spending envelope had been submitted to the Office for Budget Responsibility. The prime minister’s official spokesman added: "Not every department will be able to do everything they want to. There will be tough decisions taken, there will be tough conversations, but ultimately this government has been very clear that it will fix the foundations, it will fix the position in relation to the public finances.”
Reeves is reportedly seeking to plug a funding gap of £40bn through the budget, bigger than the £22bn hole she announced in July that the government would need to tackle.
The extra £18bn relates to funds needed to protect key departments from real-terms spending cuts and build up a fiscal buffer for the rest of parliament, according to the FT.
Reeves has repeatedly said she will not raise taxes on working people in this budget, referring to income tax, National Insurance and VAT.
One option the the chancellor is expected to pursue to raise funds is imposing national insurance on employers’ pension contributions. Government departments and the NHS are set to be excluded from this, The Times has reported. A report from the Resolution Foundation think tank last month suggested introducing this tax, with public sector employers excluded, could raise £12bn.