Good morning. There are certain phrases in news stories about government, aren’t there, where your eyes glaze over like you’ve just wound down the window and asked someone for directions. Autumn statement; early day motion; fiscal rules; white paper; ping pong, weirdly. They’re definitely all very important, but it would be cruel to stop the average punter halfway through a news story and ask them for a crisp definition.
Today’s case in point: the spending review. I mean, we all know what a spending review is, obviously – it’s when they review the spending. But it’s also one of the defining moments in the life of any government – and the one now being undertaken by the chancellor, Rachel Reeves, has been billed as the crucial first step in Labour’s plan to hit the “milestone” targets Keir Starmer set out last week, and on which he has said the government should be judged.
Today’s newsletter, with the Guardian’s economics editor, Heather Stewart, is about how the spending review works, what’s at stake, and how to tell if it’s a success. Straight on after the headlines and you can’t miss it.
Five big stories
UK news | Vodafone “unjustly enriched” itself at the expense of scores of vulnerable small business owners by slashing commissions to franchisees running high street stores, according to allegations filed on Tuesday in the high court. Vodafone denied any misconduct ahead of a £120m legal claim.
Syria | Syria’s leading rebel group has named a new prime minister, Mohammad al-Bashir, to head the country’s transitional government. Meanwhile, Israel said it had carried out more than 480 strikes over the previous 48 hours against weapons stockpiles to keep them out of the hands of extremists.
Courts in crisis | The head of the government’s sentencing review has said that specialist courts focused on breaking cycles of addiction could be rolled out across England and Wales. In an interview with the Guardian, David Gauke praised “very encouraging” pilots of intensive supervision courts.
Iran | Women in Iran could face the death sentence or up to 15 years in prison if they defy new compulsory morality laws due to come into effect this week. Amnesty International said the laws could lead to the execution of women who send videos of themselves unveiled to media outside Iran or engage in peaceful activism.
US news | The suspect in the shooting death of the UnitedHealthcare CEO, Brian Thompson, will plead not guilty and fight extradition from Pennsylvania to New York, his lawyer said yesterday. Outside a court hearing, Luigi Mangione shouted: “This is completely out of touch and an insult to the intelligence of the American people”.
In depth: ‘They need to find more money to do the things they want’
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.”
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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.
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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.”
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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.”
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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:
While some of these efforts have made notable savings for the public purse and improved civil service capability … they have often taken the form of discrete, temporary initiatives, and had less success embedding efficiency as a continuous process and culture across government. None, moreover, have led to a fundamental step-change in government’s approach to public spending.
The question of whether Reeves and Starmer can break this longstanding trend will be crucial to their success. “There’s nothing wrong with stopping and asking if we’re spending public money as effectively as possible,” Heather said. “But it is very hard to do. This is really where the rubber hits the road on whether they can achieve the things they have promised.”
What else we’ve been reading
Even with a home and savings, Elle Hunt can’t shake her money stress. So she asked an expert why so many of us worry about cash. Nimo
In his latest dispatch from Damascus, William Christou reports from the nearby countryside, where rebels are returning home to reunite with their families. He hears from Mohammed Abu al-Zaid and his uncle Abu Bilal: “I haven’t seen him for eight years, nor my brother for four,” Zaid says. “This is a happy day.” Archie
Walkable cities have been entangled with conspiracy theories about seemingly benign urban design. To unravel the misconceptions, Steve Rose explored Copenhagen’s Nordhavn district to get a sense of what life is actually like when everything is a short stroll away. Nimo
Kemi Badenoch’s victory in the Tory leadership race was evidence that her party thinks that Britain just wants “True Conservatism”, writes Rafael Behr – and so far, her leadership has shown no signs of the self-reflection that the Tories need if they are to recover. Archie
In a horrific case of police brutality, Genivaldo de Jesus Santos was fatally trapped in a police car trunk that was sprayed with pepper spray and teargas for 11 minutes. Despite officers receiving prison terms of 23 to 28 years, the incident has received little attention even in Brazil. Tiago Rogero’s dispatch from Rio de Janeiro explores why. Nimo
Sport
Champions League | Ross Barkley scored a late winner in Aston Villa’s thrilling 3-2 win at Leipzig that keeps them in contention to reach the last 16. A second-half penalty from Mohamed Salah gave Liverpool a 1-0 win at Girona.
Rugby union | The former England rugby union international Tom Voyce, 43, is believed to have died after going into the River Aln in his car, police have said. Voyce, who won nine caps for his country, is believed to have been swept away while attempting to escape the current as he crossed Abberwick Ford in Northumbria.
Cricket | The ECB is set to extend the Hundred’s controversial sponsorship deal with KP Snacks despite one of the company’s adverts for the competition being banned by the Advertising Standards Authority and a looming ban on junk food advertising.
The front pages
“Israel strikes military targets and seizes territory in Syria offensive” is the Guardian’s splash. “Israel blitzes arms silo and sinks navy in Syria” – that’s the Times, while the Daily Mirror says the rebel rulers in Damascus are “Hunting Assad’s torture squads”. The Telegraph has “Rayner to force through plans for new jails”. “Women left in agony by ‘medical misogyny’” – the Mail says there is a gynaecology care crisis. “It strengthens my resolve to continue Becky’s legacy’” – King Charles honoured the mother of a British diplomat who was raped and strangled in Lebanon, the Express explains. “Assassin suspect had ‘Jackal ghost gun’” reports the Metro while the top story in the Financial Times runs: “Complex debt bonanza feeds appetite for juicy returns”.
Today in Focus
The town that fears losing its high street to climate change
Flooding in Tenbury Wells used to be a once in a generation event, now its happening increasingly frequently. Jessica Murray reports
Cartoon of the day | Martin Rowson
The Upside
A bit of good news to remind you that the world’s not all bad
Scientists at the University of Wuhan have developed a groundbreaking sponge made from cotton and squid bone that could revolutionise microplastic removal. This innovative filter demonstrates an extraordinary ability to absorb 99.9% of microplastics from various water sources, offering hope in the fight against global plastic pollution.
With its scalable production, low cost and high efficiency, the technology promises a potential breakthrough in addressing one of the world’s most pressing environmental challenges. The authors of the study say they could have an industrial scale model ready within several years, if larger-scale testing proves successful, and it could be used in home or municipal filtration systems.
Sign up here for a weekly roundup of The Upside, sent to you every Sunday
Bored at work?
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