The Cabinet ministers of Keir Starmer have received a caution against utilizing emergency funds from the Treasury to finance increases in public sector salaries. In preparation for the upcoming Budget next month, 10 Downing Street has characterized the restriction on tapping into the government’s reserve funds as both stringent and judicious.
The advisory was communicated through a letter from James Murray, the Chief Secretary to the Treasury, to Cabinet ministers. Departments of the government that access these funds, amounting to £9 billion last year, will be obligated to reimburse the funds under new regulations in the future. However, it has been explicitly stated that these funds cannot be utilized for enhancing public sector wages.
The official spokesperson for the Prime Minister mentioned that Mr. Murray outlined strategies to restrict access to the Treasury’s reserves. They clarified that access to reserves will only be permitted under extraordinary circumstances and not for any public sector salary increments. If Secretaries of State do make a claim, they will now be required to demonstrate that all possible savings alternatives have been exhausted. This approach is described as a stringent yet prudent method of managing public expenditure.
Recent discussions within the Cabinet, including statements from Rachel Reeves, highlighted that access to reserve funds limits would be granted only for genuinely unforeseen, unaffordable, and unavoidable financial pressures. The Chancellor is advocating for adherence to these guidelines to curtail borrowing.
During a keynote address at the Labour conference in Liverpool last week, Ms. Reeves cautioned that the economy is confronting severe global challenges. She emphasized that the government will confront additional challenges in the forthcoming months, with decision-making becoming more complex due to harsh global economic conditions and the increasingly evident long-term damage to the economy.