RISHI Sunak plans a spending squeeze which could derail the PM’s “levelling up” drive.
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Turning off the spending taps will mean big investment projects such as new northern rail links may have to be scrapped.
And there are fears urgent action such as overhauling the social care system, a house-building boom and tackling climate change will also go on hold.
A minister said: “We had hoped the PM’s call to build back better would mean a summer of big announcements.
“But it’s now looking increasingly that they’ll be shoved into the deep freeze.”
Mr Sunak will put off any big spending commitments until his autumn spending review.
But an unexpected rise in inflation to 2.1 per cent last week heightened fears of an interest rate hike cranking up pressure to pay off the national debt.
A Treasury source said: “The Chancellor is determined to be responsible with public finances and make sure we are spending within our means.
“We’re looking at a much smaller pie. We’ve got to slice it up in the best way we can.”
Reforming social care would cost up to £7billion a year.