Angela Rayner and Rachel Reeves are at loggerheads over the crucial spending review as the deputy prime minister’s department passed an unofficial deadline to settle its budget until the next general election without securing an agreement.
With the spending review set to be unveiled on 11 June, departments have told The Independent that the Treasury wanted their plans agreed by the start of this weekend.
But The Independent understands that Ms Rayner’s Ministry of Housing, Communities and Local Government (MHCLG) is one of a number of departments yet to settle with Ms Reeves and her deputy Darren Jones.
The clash at the top of the Labour government comes as ministers resist cuts to their departments and marks a distinct clash over political philosophy between the two most senior women in the government.
Ms Rayner wants a more progressive higher tax approach with fewer cuts, while Ms Reeves is being accused of wanting “austerity 2.0”.
Ms Reeves has also been struggling to reach deals with Yvette Cooper’s Home Office; Steve Reed’s Department for Environment, Food and Rural Affairs; and Ed Miliband’s Department for Energy Security and Net Zero.
Only defence with a spending package of 2.5 per cent of gross domestic product, and health budgets are protected, with others expected to find efficiency savings to help Ms Reeves balance the books.
Sources have said that claims Ms Rayner stormed out of a meeting last weekend, slamming the door, were “not true”, but admitted conversations, while “cordial”, have “not been easy”.
Now it is understood that her demands for a proper settlement for local government in England, as well as funding for the affordable homes scheme beyond 2026, have left her at loggerheads with the chancellor.
Trade unions are also taking a very close look at the settlement for councils which will be tied closely to pay demands over the coming years. Already councils like Birmingham have been facing potential bankruptcy because of tight budgets and wage demands.
The stand-off comes just a week after a memo from Ms Rayner to Ms Reeves was leaked to the Daily Telegraph in a move which allies of the deputy prime minister described as “poisonous”.
In it she suggested eight different wealth taxes as an alternative to cuts as well as limiting benefits for migrants and reintroducing a payback scheme for middle class families claiming child benefit which was originally introduced by former Tory chancellor George Osborne and then ditched by Jeremy Hunt.
An ally of the deputy prime minister noted that “she is at least make the progressive case” for an alternative to Ms Reeves’ strategy.
The row comes amid concerns by Labour MPs that Ms Reeves is “pushing for austerity 2.0”.
Already the chancellor has been forced into accepting a U-turn on cutting winter fuel payments to pensioners.
She and Sir Keir Starmer are also facing a rebellion from Labour backbenchers on cutting disability benefits.
The chancellor has also had her hand forced on investment for red wall constituencies where Labour MPs are under threat of losing their seats to Reform. There have been reports that she plans to splurge on projects in the north of England and midlands by tweaking her strict borrowing rules.
Ms Reeves is under added pressure because of the strict borrowing rules she has imposed on herself to maintain economic credibility as well as the election promises not to raise employee national insurance contributions, income tax or VAT.
A Treasury source noted: “More than half of departments have settled [funding agreements] three weeks out from the spending review, which is pretty unusual and the fact you’d always expect negotiations to go on.”
