Winners and losers of Labour spending review

Good morning. One of the big political stories of the first half of next year will be the spending review, which the government will hope will set out its spending plans for the rest of the parliament.

(I say “the government will hope”, because of course some kind of shock external event, or a political mess, might force Keir Starmer’s administration to revisit and redraft those plans.) More on the review in today’s note.

Fear will keep the spending departments in the line. Fear of this dashboard!

Because the prime minister’s new six milestones are more precise than the missions, they are a useful tool to refine the areas that should be prioritised and allocated money.

There are lots of reasons why the “fastest growth in the G7” mission was daft in my view, but one reason is that of course all the departments can reasonably argue that they are vital to the growth mission. The government’s new “living standards” target visibly doesn’t apply to every department.

As I wrote last week, the milestones are pretty expensive and in reality many of the big decisions in terms of “how the Treasury spends its fiscal firepower” were made for it in Starmer’s big speech last week.

The Treasury officially launched that process yesterday but it won’t conclude until June. In terms of the inner life of the government, we can neatly split it into “Act One: Arguments About What Should Be Prioritised In The Spending Review” and “Act Two: Arguments About The Decisions Made In The Spending Review”. George Parker, who was at the launch in Maidstone, reveals that Darren Jones, the chief secretary to the Treasury, has a new device to keep the spending departments in line: a “dashboard” that alerts them if they blow their budget:

There’s a dashboard that starts flashing at them if they type in too much money for their budget,” Jones told the Financial Times. “It tells them that they’ve blown their budget and also how much we would have to put up taxes to pay for the extra spending,” he said — adding there would be no new taxes to bail ministers out.

To which all I can say is: cabinet ministers who don’t really have a “milestone” and therefore can expect to get a very tight spending settlement are really, really going to hate that. Many already felt that the last spending round consisted of “well, sorry, we have these tax commitments, so you are just going to have to eat crow”. They will enjoy it even less this time around.

Now, one big and important difference between the government’s first Budget and the current spending review is that Downing Street was previously in a state of considerable upheaval. Starmer did not have the people around him that he wanted or needed and almost everyone who came into contact with Downing Street felt like they were talking to a many-headed and deeply confused hydra.

I’m not saying that no one ever complains to me about Downing Street in the post-Sue Gray era — they do! But they also say that Morgan McSweeney, who replaced Gray as chief of staff, has established a clearer sense of what Downing Street wants. Now, one thing that McSweeney wants today is to keep Labour’s promises on tax.

But historically, whether the government is Labour or Conservative, the prime minister of the day wants to spend money and the chancellor of the exchequer tends to resist it. (Often after they leave office, former prime ministers will suddenly claim that they were all for spending restraint and former chancellors will paint themselves as the avatars of fiscal excess, but this is very rarely true when they are actually in office.)

My guess is that in 2025, as a result of the more effective and politically attuned Downing Street, we will see the emergence of a more “normal” relationship between Downing Street and the Treasury. And by that I mean one in which Downing Street pushes and pulls for more money, rather than the dynamic of the last Budget, when spending departments would appeal to the prime minister and find the prime minister and chancellor pretty much in tandem. That dashboard might end up flashing an awful lot next year.

Now try this

I saw Anora at the cinema. It’s a brilliant subversion of the Pretty Woman story, and while I didn’t quite love it as much as Danny Leigh did, and I doubt I will revisit it as often as I do Sean Baker’s other films, it is very much worth your time.

Top stories today

• Target confusion | England’s NHS is heading into its busiest ever winter “confused” about the government’s priorities for the service, health leaders have warned, urging ministers to be honest about the trade-offs required to hit performance targets.

• Read my lips | UK public sector workers face fresh pay restraint next year, after the Treasury said it would not raise taxes to fund more generous awards. The education and health departments said in evidence to independent pay review bodies that anything beyond a 2.8 per cent increase in pay for teachers, NHS staff and doctors would be unaffordable in 2025-26.

• New defection | Property magnate Nick Candy has left the Conservative party to become the treasurer of Nigel Farage’s Reform UK. Candy, who has given more than £300,000 to the Tories, said he would donate a “seven-figure number” to Reform.

• ‘Kemi is not interested in doing Nigeria’s PR’ | Nigeria’s vice-president launched a scathing attack on Conservative party leader Kemi Badenoch in an apparent response to her comments on the west African country where she spent most of her childhood.

• ‘Shocking’ rise in homelessness | Soaring private rents, rising evictions and a chronic lack of affordable social housing have led to homelessness in England increasing by 14 per cent, research from Shelter reveals. The Guardian wrote it up here.