Is Labour’s ‘reform’ to the state just a cover for austerity 2.0?

Balancing the nation’s books will not be easy and some pain will be inevitable. But there is a limit to what salami-slicing ‘efficiency savings’ can achieve after years of cuts, warns Andrew Grice

The announcement that 2,100 of the Cabinet Office's 6,500 jobs will be axed is cited by ministers as evidence that they are serious about reforms to “rewire the state”.

At first glance, it looks like a bold act by Pat McFadden, the Cabinet Office minister and one of the government’s most powerful figures. It is an intended signal to cabinet colleagues to follow suit – to deliver the 15 per cent cut in civil-service running costs Rachel Reeves has demanded, as part of her government-wide spending review.

Labour politicians who once criticised their Conservative predecessors for attacking a self-serving Whitehall “blob” now tell me: “We know what they meant.” They, too, are convinced a “flabby” civil service (in Keir Starmer's words) is not match fit to deliver the change the government wants. To frustrated ministers who pull levers and complain that nothing happens, Whitehall’s “Rolls-Royce machine” at times feels more like a clapped-out, misfiring rust bucket.

A total of 50,000 civil service jobs are likely to disappear – many more than the 10,000 figure given by the chancellor. True, the size of the civil service has grown by 34 per cent to 513,000 staff since the pandemic. But as one senior Whitehall figure put it: “Ministers never talk about the extra functions given to us by their demands and their legislation.”

Starmer and his ministers do talk a good game about “reform”. There is a strong case for it at the Cabinet Office. It is supposed to be a strong strategic centre that helps 10 Downing Street deliver the government’s priorities and bangs departmental heads together. But it has ballooned into an unwieldy operation after becoming a dumping ground for the bits and pieces no Whitehall department wants; many of its functions would sit better in departments.

Indeed, 900 of its 2,100 job cuts will be achieved by transferring staff to other parts of Whitehall. As ever, headlines with big numbers look different on closer inspection. The Cabinet Office had already announced a headcount reduction of 400-500, and that it would move functions such as digital and project management elsewhere, so a large part of the 2,100 is “not news”, according to the hawk-eyed Institute for Government think tank.

Across the government waterfront, there is growing evidence its “reforms” are motivated primarily by the urgent need to save money. Starmer and Reeves do not want a very tight spending review to look like the austerity 2.0 they promised to avoid. Ministers are happy to flag up popular cuts: axing civil servants and switching overseas aid money to defence will probably play well in The Dog and Duck.

Some more controversial cuts are dressed up as change. Ministers would rather talk about their £1bn package of back-to-work measures rather than their £5bn of cuts to sickness and disability benefits. The package gives them some cover to label the shake-up as “reform” – and to imply (wrongly) that everyone on these benefits is capable of work.

But the small print of last month’s spring statement reveals that only £200m will be spent on the back-to-work drive when the benefit cuts bite in the 2026-27 financial year, and its budget will not reach the £1bn a year until 2029-30. The £500m of last-minute savings on universal credit on the eve of the spring statement surely revealed the real agenda on welfare – to enable Reeves to meet her fiscal rules.

Civil service unions claim the “reforms” will harm the very frontline services ministers argue will benefit from funds accrued by “efficiency savings”, making it harder to achieve Starmer’s “plan for change”. The unions would say that, wouldn't they? But they have a point.

Lucille Thirlby, assistant general secretary of the FDA union representing senior civil servants, said there was a “difference between reforming and cutting”, adding that “the success of any reforms will depend on whether the scale of cuts undermine the reform”. For example, the abolition of NHS England will be accompanied by unfunded job cuts in health trusts and integrated care boards; it could mean a total bill of £1bn for redundancy costs which diverts resources from the front line.

A promised cull of the more than 300 quangos, including NHS England, is part of the reform agenda. As on civil service jobs, ministers play a self-fulfilling numbers game; they will have to deliver scalps. It would be better to focus on the savings rather than headline-grabbers on cutting jobs or axing bodies. The low-hanging fruit in the “quangocracy” has already been picked. Senior Whitehall figures suspect the real aim is to save money and say history tells us that hurried mergers or closures rarely work.

Balancing the nation’s books will not be easy and some pain will be inevitable. But there is a limit to what salami-slicing “efficiency savings” can achieve after years of austerity. A more honest approach would be for ministers to decide the state should withdraw from some functions. That would be much more politically sensitive, but more effective in achieving the savings they want.

Genuine “reform” done strategically would be better than yet another round of rushed penny-pinching.