Trade unions are demanding a “cast iron assurance” there will be no further cuts to public services after the Treasury warned there would be no extra cash to compensate for soaring inflation.
Liz Truss signalled that Whitehall departments would have to find efficiency savings to make up for the falling real-terms value of their current spending settlements.
“There are always ways that we can organise things more efficiently. What I want to make sure is that taxpayer money is focused on frontline services,” the Prime Minister said in a pooled clip for broadcasters.
The slump in the value of the pound after the markets took fright following Chancellor Kwasi Kwarteng’s £45 billion in unfunded tax cuts has added to the inflationary pressures from sky-high energy prices.
Earlier Treasury Chief Secretary Chris Philp said departments would be conducting an “efficiency and prioritisation exercise” as he insisted the existing three-year spending settlements would not be reopened.
“The efficiency and prioritisation exercise is designed to firstly make absolutely sure we stick to those spending limits and secondly make sure that we are prioritising expenditure, not on anything that is wasteful, but on things that really deliver frontline public services and drive economic growth,” he told Sky News.
“We are going to stick rigidly to those spending limits because it is important to be financially responsible.”
Mr Philp had previously refused to commit to the regular annual uprating of benefits in line with inflation, which Rishi Sunak had promised to do when he was chancellor.
However TUC general secretary Frances O’Grady said that after years of austerity there was simply no scope for further efficiencies.
“After 12 years of cutting services to the bone, there is nothing left to trim. When the Conservatives say efficiency savings, this is usually code for cuts,” she said.
In a letter to the Prime Minister and Chancellor signed by 18 unions, they urged Ms Truss to honour a pledge during the Tory leadership campaign that there would be no further cuts to spending.
They said public sector staff had seen their living standards “decimated” by pay cuts and pay freezes and that further reductions would be “an act of national vandalism and a huge betrayal of the British people”.
“Frontline services are already at breaking point. They must not be sacrificed to make the top 1% even richer,” they said.
“Unions will not sit by and allow the government to impoverish public services and the amazing staff who deliver them. We won’t allow the social fabric of this country to be destroyed.”
Unison general secretary Christina McAnea, one of the signatories to the letter, said: “Suggestions that benefits won’t rise with soaring inflation and beleaguered public services are to be squeezed is a terrifying prospect.
“Essential services need support and investment so they can hold on to experienced staff and deliver for the public, not cuts that will harm communities irreparably.”