Rachel Reeves targets 'wasteful spending' as government departments challenged to find 5% savings

The chancellor said this was not a return to austerity as departmental budgets "will increase" over the next five years, but said it was "absolutely vital that we get value for money".

"I have no doubt that we can find efficiency savings within government spending of 5%, and I'm determined to do so because it's through finding those efficiency savings that we'll have the money to spend on the priorities of the British people," she said.

The Treasury confirmed the 5% saving is expected by the end of this parliament in 2029 and is not an annual goal.

Launching the second part of the spending review on Tuesday, Ms Reeves said getting value for money was essential, "especially when taxes are so high and we're asking people to pay so much".

"That's why we're really going to be driving productivity and efficiency and cracking down on wasteful spending in public services to make sure that every pound of taxpayers money is spent well."

Sir Keir Starmer's spokesman said it will be up to each department to identify where they can make the 5% savings.

The prime minister has written to every civil servant telling them he appreciates what they do for the country and understands bureaucracy is a barrier that "frustrates you every bit as much as they frustrate me".

He has called on them to work together to hit the government's targets and told them he wants them to feel "emboldened" to challenge anything holding them back from delivering the milestones he set out last week.

Every cabinet minister will also receive a letter from Darren Jones, chief secretary to the Treasury, announcing the start of the public spending review.

Whitehall departments have been ordered to submit their spending plans to panels of private sector experts as part of the review, as the chancellor said she was determined to wield an "iron fist against waste" by examining each department's expenditure in detail.

After Labour won the election in July, Ms Reeves launched a multi-year spending review as she accused the Conservatives of not holding one since 2021 so they "never fully reflected the impact of inflation".

She set departmental budgets for next year in October, with total departmental spending set to grow by 1.7%.

The chancellor used her first budget to make £40bn in tax increases, which she said was needed for public services.

Labour has made saving money in government a central pledge as it hopes to show voters it has improved public services before the next election in 2029.

Last week, Sir Keir Starmer accused "too many people in Whitehall" of being "comfortable in the tepid bath of managed decline".

On Monday, cabinet office minister Pat McFadden called on "disruptors, innovators and creative thinkers" to help make the civil service more productive.

The government is providing £100m to launch "test and learn" teams of problem solvers to find how to improve public services.

Mr McFadden said he wants Whitehall to have more of a "start-up" mentality, citing Airbnb, Whatsapp and Spotify as examples of the mindset the civil service should take on to be more productive and less bureaucratic.

-SKY NEWS