Rachel Reeves is facing a battle to get the spending review over the line with several ministers said to be holding out.
The Chancellor is due to unveil the crucial three-year settlements for departments in just over a week, amid mounting pressure on the public finances.
However, she is still thought to be haggling with Ed Miliband over cash for Net Zero projects and Angela Rayner over housing and local government funding.
Home Secretary Yvette Cooper has been pushing for money for police. Bridget Phillipson now appears to have struck a deal at education.
Keir Starmer gathered his Cabinet this morning, after a defence blueprint published yesterday threw the problems facing the government into stark relief.
The PM vowed to get Britain ‘war-ready’ as he warned of the threat from Russia and other hostile states. But he refused to give a firm timetable for spending 3 per cent of GDP on defence.
Sir Keir has also signalled he is ready to bow to a Labour revolt demanding restoration of the winter fuel allowance, and easing of the two-child benefit cap.
With the economy stalling, that has led to warnings he will be forced into ‘chunky’ tax rises by the Autumn unless Ms Reeves loosens her fiscal rules and borrows even more.
There was another grim sign today as the OECD downgraded growth forecasts for the UK from 1.4 per cent to 1.3 per cent this year, and from 1.2 per cent to 1 per cent in 2026.
Chancellor Rachel Reeves is due to unveil the crucial three-year settlements for departments in just over a week, amid mounting pressure on the public finances
Angela Rayner, pictured in Downing Street today, is still said to be haggling over housing and local government funding
Ms Cooper, pictured at a recent Cabinet meeting, is reportedly demanding enough police spending to meet Labour’s crime-cutting ‘mission’
Mr Miliband is said to be embroiled in one of the biggest disputes, over funds for the ‘warm homes’ insulation plan, carbon capture projects and GB Energy
The spending review allocates funding to departments from within the fiscal ‘envelope’ that was set by the Chancellor at the Budget.
That package hiked taxes by around £40billion a year and changed rules on borrowing, allowing for a front-loaded splurge on day-to-day and capital spending.
But analysts always cautioned that the plans looked implausibly tight in the later years, and issues have been exacerbated by lower growth.
According to the Financial Times, Ms Cooper is demanding enough police spending to meet Labour’s crime-cutting ‘mission’.
Mr Miliband is said to be embroiled in one of the biggest disputes, over funds for the ‘warm homes’ insulation plan, carbon capture projects and GB Energy.
‘Within this spending review there is £300billion to be distributed between departments because of decisions taken by the chancellor in last year’s Budget,’ one Reeves ally told the paper.
‘The message at the spending review is we will be investing in Britain’s renewal.
‘We will be investing in the country’s security, health and economy.’
Bridget Phillipson now appears to have struck a deal at education
