Sajid Javid has written to ministers urging them to identify projects that could be scrapped, to cut costs and “refocus” resources on Boris Johnson’s priorities of hospitals, schools and “levelling up”.
In a letter signed by the chancellor and the PM, each department has been told to identify potential cost savings worth up to 5%, by 2 March.
“This will allow us to refocus our efforts towards the things which matter most: strengthening our NHS; making our streets safer; and levelling up opportunity across the country,” the letter says.
Officials will be expected to examine their budgets line by line, asking whether each item supports what Johnson likes to call “the people’s priorities”.
Asking for potential spending cuts is standard practicebefore a spending review – but the emphasis on excising plans that don’t fit the Johnson agenda underlines the urgency with which Downing Street hopes to reshape government.
March’s budget is expected to include a significant expansion of long-term investment, funded through extra borrowing, as the Conservatives ditch the tight spending constraints of the past decade.
In a speech during the election campaign setting out his plans for the economy, the chancellor said: “Incredibly, at the moment, we can borrow in real terms at negative rates, meaning it is a responsible time to invest.”
This approach of borrowing to invest was enshrined in Gordon Brown’s “golden rule”, and championed by a string of Labour shadow chancellors – but rejected by successive Tory chancellors as too lax.
Javid is also expected to use Brexit as an opportunity to rewrite the Treasury’s “green book” for measuring the value of investment proposals – a decision that could favour costly plans such as the controversial HS2 rail project.
Javid said he would still aim to match current spending with tax revenues, however. “We can’t run an overdraft for ever on our day-to-day spending,” he insisted in his November speech.
That is likely to mean the Tories’ more immediate manifesto promises, including recruiting extra nurses and police, will have to be funded partly from within existing budgets – with detailed plans set out in a spending review expected by the autumn.
Whitehall departments are being urged to consider ditching some activities outright in order to save money, rather than seeking the “efficiency savings” often favoured by previous administrations.
With many infrastructure projects taking years to deliver, Downing Street insiders also say Johnson is impatient to identify more immediate ways of appealing to voters – particularly in some of the seats it snatched from Labour last month.
The shadow chancellor, John McDonnell, said the letter, which was first leaked to Sky News and the Sun, was evidence that the chancellor would not end austerity, however.
“We were promised by Johnson and Javid that austerity had ended and the cuts in public services were over. They clearly aren’t on this evidence. Another Johnson lie exposed,” McDonnell said.
Johnson is determined to shift the emphasis away from Brexit after the UK formally leaves the EU on Friday evening, and focus on domestic priorities.
He is expected to make a speech next week setting out his approach to negotiating the future relationship with the EU, a task that will begin in earnest in March, once the EU27 have agreed collective negotiating guidelines.
The Department for Exiting the EU will cease to exist at 11pm on Friday, when the UK officially leaves the bloc – and Johnson has asked ministers and officials to avoid using the word “Brexit” in communications after that.