Rachel Reeves has told various Whitehall departments to prepare for their budgets that are frozen under 'flat cash' expenditure plans, it was created last night.
With a slow growth and high loan costs, the Chancellor wants to press the expenses by unprotected departments.
The treasury has reportedly asked them to model 'flat cash' spending plans, so that their budgets are frozen in cash.
Departments are currently offering funds from 2026 to 2029 as part of a large expenditure review in June.
Health, education and defense budgets are protected, but other departments are confronted with estimated £ 9 billion real terms cuts in daily expenditure, according to the Institute for Fiscal Studies.
A senior official in an unprotected department told Bloomberg that the treasury had asked them to model 'flat cash' plans – which suggests that there would be major cuts, once adapted for inflation.
Another told the outlet valve that they were asked to model cuts from three percent to five percent in real terms.
Flat cash budgets are when there is no additional financing for inflationary pressure.
With a slow growth and high loan costs, Rachel Reeves (photo) wants to squeeze expenses by unprotected departments
Mrs. Reeves has previously excluded a return to cuts and describes 'conservative cuts' as a 'destructive choice for our public services – and also for investments and growth'.
But the rising interest rates and slow growth have led to warnings that the Chancellor could get a shortage of £ 20 billion.
“Higher loan costs are just the tip of the iceberg, and weak growth is the greatest care instead,” said Allan Monks, an economist at JP Morgan, last month.
'Growth perspectives have partially deteriorated due to tax increases at the last budget. This can leave a tax gap worth around £ 20 billion that the government must connect in the spring. '
The Chancellor has previously also excluded both increasing loans and the levying of taxes after the considerable tax increases in the October budget, so she had few options that go beyond further cuts.
Departments currently offer for funds from 2026 to 2029 as part of a large expenditure review in June (file photo)
She has given most departments more money in the next two years, but then planting cuts in many areas.
Any extra money is expected to be swallowed by the NHS.
In response to the Bloomberg reports, a HM Treasury spokesperson said: 'The Chancellor has asked all departments to deliver savings and efficiency of 5 percent of their current budget as part of the first zero-based expenditure review in seventeen years.
“Every pound of government spending is questioned, to eradicate waste and get the best value for taxpayers while we deliver their priorities in the plan for change.”
Sources emphasized that all spending scenarios that are given to departments would not be the final allocations.
