| See you if you can decipher the code in Rachel Reeves’s comments yesterday: “I said I would have an iron grip on the public finances and that means taking an iron fist against waste.” It’s not an especially subtle message, but it does express the central focus of the spending review unambiguously: scrutinise spending as robustly as possible in the hope of releasing funds for the government’s main priorities. “That is going to be very important for them to succeed in their programme,” Heather said. “The budget poured quite a lot into public services this year and next, with a 3.4% increase and a lot of it going to the NHS and schools – but the three years after that, the IFS says that it will only be about 1.3%. So they need to find more money to do the things they want.” What is a public spending review? Until 1998, the government generally decided tax and spending policy on a year-to-year basis. For obvious reasons, that was widely viewed as an approach that bred extremely short-term thinking, with every decision based on the political necessities of the moment. The introduction of spending reviews was meant to be a way to change that. “They are something that happens every few years, as a way of setting the budgets for every department,” Heather said. “The budget announced the total spending envelope: this is how it will be allocated within that. It’s really the Treasury’s moment of maximum power: it will ask each Whitehall department how they plan to spend money over the next four years, and then get into negotiations over how much they’re actually going to get.” By viewing spending over a longer period, it becomes easier for the government to allocate money strategically, and gives departments much-needed certainty so that they can plan for the future. Crucially, as this useful Institute for Government explainer sets out, the process puts all of the competing pressures on the exchequer on the table at the same time, so that they can be considered in the round. This one will take about six months to complete. What approach is the government taking to this one? As Reeves and Starmer have been fond of telling anyone who will listen over the last six months, this is not a period of governmental largesse. So the focus is on finding ways to save money, with a target of 5% efficiency savings. But, Reeves is at pains to say, that is in order to fund spending elsewhere, not to make overall cuts. Of course, sometimes the difference between a cut and a saving is a fairly semantic one, and not many people will be persuaded by that explanation if it’s a service they use that’s losing funding. Reeves has decided the most effective way to do all this is with a “zero-based review”. In an article for the Financial Times last week, she wrote that this would “maximise the value of every pound … No vanity projects. No distractions. No gimmicks.” “Quite often, spending reviews start with the existing budget, and looks at how you might trim 2 or 3% off,” Heather said. “The theory with this one is that departments will go through line by line and say: does this fit with our priorities?” In practice, though, it’s obviously pretty hard to imagine every single item in the UK’s £1.27 public spending being subjected to rigorous assessment, or to believe that every worthwhile project or hire will be easily allocated to one of Starmer’s “milestone” buckets. “The example the Treasury provided was of a scheme to put social workers into schools, which was assessed and found not to be giving good value for money, and so got cancelled,” Heather said. “But that’s worth £6.5m – it’s a tiny example.” What are the key dividing lines in negotiations? In the past, most famously in the Blair-Brown years, spending reviews were quite often engines of warfare between the Treasury and No 10: when he was chancellor, Gordon Brown wouldn’t let Tony Blair near the details of the plans, and used them to maximise his influence over government policy. So, early in the Starmer-Reeves administration, the two sides are unsurprisingly much closer together. “They appear to be in lockstep at the moment,” Heather said. “They did a one-year review ahead of the budget because of the time pressure, and they made a point of briefing that they were doing it together – there were supposedly senior figures from the No 10 and Treasury teams sitting together making calls to departments.” The more likely point of tension today is with departments which say that they need more resources to fulfil the ambitions that Starmer has set out. “We’ve already had a bit of anguish in a letter from Angela Rayner, the housing secretary, that became public, saying that billions more would be needed to hit housebuilding targets,” Heather said. “But it’s all a negotiation. Ministers who are successful are likely to be the ones who persuade the Treasury that the cuts they’re being asked to make will affect significant numbers of voters. The traditional mechanism in the Tory years was a letter from a group of generals to the Telegraph warning that we only have a submarine and two dogs, and you can’t fight a war with that. We may well see Labour equivalents.” Can the government really find 5% efficiency savings? Most fair judges say that there are genuine efficiencies to be made within government: the auditor general, Gareth Davies, suggested in September that as much as £20bn could be saved through better governance. If that is the scale of the prize – half the total tax rises in this year’s budget – you can see why it has seemed desirable to so many chancellors. On the other hand, the sheer number of governments that have leaned into efficiency savings as a way to fund public services or tax cuts does rather suggest that it is a convenient political line more than a serious pursuit. Just a partial list: Gordon Brown’s promise of £12bn efficiency savings over four years in 2009, David Cameron’s call for £12bn in efficiency savings in a year in 2010, Theresa May’s instructions to the NHS to find efficiencies to cover a £22bn funding shortfall, Boris Johnson’s demand for £5.5bn in efficiencies in 2022 under the oversight of a new “efficiency and value for money committee”, Liz Truss’s promise to save £11bn a year in a “war on Whitehall waste”, and Rishi Sunak’s call for the public sector to be 5% more productive to save £20bn a year. Quite often, these don’t actually come to anything. In the New Statesman yesterday, Will Dunn noted the Johnson government’s promise to sack 91,000 civil servants turned into an extra 35,000 being hired by the time of the election. As a rule, this report from the Reform thinktank says: | 