UNDER FIRE Rachel Reeves has signaled painful spending cuts are on the way as she vowed to “take action” to balance the books.
The chancellor will cut billions from the welfare budget after market turmoil wreaked havoc on the state’s finances.
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Chancellor Rachel Reeves has signaled that painful spending cuts are on the wayCredit: EPA
But she faces a growing cabinet revolt as government insiders warn that some departments have already been “cut to the bone” and will struggle to make more savings.
Ms Reeves is also facing a barrage of criticism from within the government for being too doomy in the run-up to the budget, putting off investors and sending the economy into a downward spiral.
After a press conference in Beijing, Ms Reeves told reporters: “I was really clear that our fiscal rules are non-negotiable – that we will pay for everyday spending with tax receipts and that we will reduce debt as a share of GDP.
“Those fiscal rules that I set out in the budget in October are non-negotiable and we will take steps to ensure they are met.”
READ MORE ABOUT RACHEL REEVES
Her comments signal much bigger cuts to the public sector than previously expected – after she promised business they would not be burdened with further tax rises.
The under-fire Treasury chief spoke out after days of market turmoil fueled fears of a 1970s-style stagflation crisis.
Labor has already promised to cut £1.3bn from the Sickness and Disability Benefit Act each year – with more details to come in the spring.
The Sun was told on Sunday that the Finance Ministry wants to go further – with more measures to get people back to work.
The chancellor is scrambling to find ways to calm markets after a disastrous week that overshadowed her trip to China.
At the end of the month, he will deliver a speech on growth in which he will outline plans to cut red tape, boost trade and introduce market reforms to stimulate the economy.
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A Finance Ministry source said: “She will leave no stone unturned on growth.”
Ministers have been ordered to carry out a “line-by-line” spending review to find savings and find ways to boost growth.
A senior Whitehall insider said: “This review will be painful. There could be a rebellion in the cabinet.”
One department insider said they are desperately trying to be as cost-effective as possible, adding: “We’re not panicking yet.”
A senior leader said: “Her dire warnings about the state of the public finances may have made sense politically – but investors listened and seem to have been spooked.”
‘Nightmare’
Borrowing costs have soared to levels beyond the worst of the disastrous Liz Truss era.
It pointed fingers at the chancellor’s tax hike budget, which increased employers’ National Insurance contributions.
One boss at a major retailer said Ms Reeves’ budget was a “nightmare” for many.
They called on the Government to abandon plans to burden bosses with extra red tape when it comes to workers’ rights to reduce the burden and help boost growth.
One said: “The government is making more regulations about business.
“They have adopted an anti-obesity measure that will ban mince pies from being advertised on TV before 9pm and they want to introduce a tax on food packaging.
I don’t think Reeves is going anywhere anytime soon.
Minister of Labour
“If you want to accelerate growth across the board, this doesn’t make sense.”
Last year, several ministers wrote official letters to the Treasury and Prime Minister Keir Starmer objecting to the scale of the cuts being asked of them.
The market turmoil of recent weeks has led some in Westminster to suggest that Ms Reeves could even be sacked as chancellor if she does not turn things around.
But most Labor ministers and aides believe it is “not too bad yet” and point out that Sir Keir and Mrs Reeves have worked “hand in hand”.
One said: “I don’t think Reeves is going anywhere anytime soon.”
Behind the scenes, many in government are openly questioning why Ms Reeves didn’t come up with a growth plan sooner. One said: “She should be in charge of growth. What kept her so long?”
All eyes will be on the markets tomorrow. If the cost of borrowing rises further, Mrs Reeves will find herself under new pressure.
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