Jeremy Hunt, the UK’s new chancellor, has called on his cabinet colleagues to cut spending across their departments as the government cast doubt on the future of the UK’s pensions “triple lock”.
Hunt urged ministers to find savings at a cabinet meeting on Tuesday, as he grappled with a budget shortfall that remains approximately £40bn, despite his decision this week to rip up almost all the tax cuts in the government’s ill-fated “mini” Budget.
Downing Street said the chancellor “made clear public spending would continue to rise overall but departments will continue to be asked to find ways to save taxpayers money.”
At a time when inflation is around 10 per cent, small nominal increases in departmental expenditures equate to real-term cuts.
The Downing Street spokesperson said the planned savings were necessary since UK public spending had reached almost £1tn a year but insisted they “would not affect the service the public receive”.
The spokesperson added that Prime Minister Liz Truss could not guarantee that she would keep the UK’s triple lock, under which the state pension rises every year in line with whichever is highest out of inflation, earnings or a 2.5 per cent increase.
Truss said only two weeks ago that she remained “committed” to the promise, which was in the 2019 Tory election manifesto.
But the spokesperson said on Tuesday that neither the prime minister nor chancellor could make “any commitments on individual policy areas” at present, given the wider review of public spending.
“We are very aware of how many vulnerable pensioners there are. And, indeed, our priority ahead of this fiscal plan will be to ensure we continue to protect the most vulnerable in society,” he said.
“At this point it is not right to start pre-empting a collective piece of work which needs to be carried out across government on all spending.”
The measures to trim expenditure, which will be part of a statement on government spending that Hunt has promised for October 31, come as the new chancellor seeks to stabilise Britain’s public finances and reassure financial markets.
His appointment by Truss on Friday capped three weeks of turbulence in the gilts and sterling markets in the wake of last month’s fiscal statement. But the subsequent U-turns have hollowed out Truss’s agenda and left her future in Downing Street hanging by a thread.
Truss opened Tuesday’s cabinet meeting by repeating her admission that the government had gone “too far and too fast” in the “mini” Budget — although she said this had been exacerbated by global factors such as inflation.
She said she had subsequently acted to ensure economic stability but remained fully committed to her “growth agenda”. She added that the October 31 plan would require “difficult decisions”.
Downing Street added that the government remained committed to its pledge to raise defence spending to 3 per cent of gross domestic product by 2030. Ben Wallace, defence secretary, has threatened to resign if that promise is junked.
But the spokesperson hinted there could be alternative ways of meeting the defence spending target — implying possibly slower increases in the mid-2020s than previously planned.
“The shape of that increase will be set out at future spending reviews in the usual way,” he said. “How we get to that 3 per cent will be shaped in conjunction with MoD and Treasury.”