Keir Starmer says Treasury will be ruthless on public spending cuts

The Treasury will be “ruthless” over public spending cuts to help meet the government’s fiscal rules at this summer’s spending review, Keir Starmer has said, despite previous promises over austerity.

The prime minister said on Monday Rachel Reeves was “absolutely right” to take a tough approach to public spending after a bruising week in which the cost of government borrowing rose and the value of the pound fell.

Starmer said he had full confidence in Reeves and that the chancellor was doing a “fantastic job” despite concerns among some Labour MPs over her plan to get the British economy back on track.

At the launch of the government’s artificial intelligence action plan in east London, Starmer said turning the economy around after more than a decade of Conservative rule was always going to take time.

“We never pretended, nor would anybody sensibly argue, that after 14 years of failure you can turn around our economy and public services before Christmas. Before the election, I said it is not going to be possible to do this in six months. It’s going to take time,” he said.

Asked about Reeves considering imposing steeper cuts to public services to repair the government’s finances, he told reporters: “Yes, we will be ruthless, as we have been ruthless in the decisions that we’ve taken so far.

“We have got clear fiscal rules, and we are going to keep to those fiscal rules, and that’s why the chancellor was absolutely right in the words that she chose to describe the approach that we will take.”

Government officials have told the Guardian that Reeves is prepared to reduce departmental spending even more than planned, having ruled out increases to either borrowing or taxes. Any measures to avoid breaking her fiscal rules could be announced at an emergency statement in the spring.

The prime minister told reporters: “Rachel Reeves is doing a fantastic job. She has my full confidence. She has the full confidence of the entire party.

“She was given an incredibly challenging job at the budget. She took tough decisions. She was right to take the tough decisions.” He declined, however, to say whether she would still be his chancellor by the end of this parliament.

Some ministers are concerned the government has boxed itself in with its fiscal rules, by ruling out further tax rises or borrowing. Starmer insisted the government would stick to its plan, amid the shaky economic situation which could affect public spending.

He said economic growth was “our No 1 priority”, adding: “We’ve said that throughout, and all of the other work we’re doing ladders up to this.” Changes to planning rules, the industrial strategy and embracing artificial intelligence would fuel growth, he said.

But he added: “We do have in place fiscal rules, which we will absolutely stick to, because they are necessary to provide the stability that we want.”

He suggested that public service reform was the “lever that hasn’t been pulled enough”, suggesting this needed to be pulled “hard and quickly” by his government.

Downing Street officials have said any new spending reductions would “never be at the levels you could describe as austerity”, which Reeves and the prime minister have both previously ruled out.

The Tory MP Gareth Davies, the shadow financial secretary, said: “Labour are trying to insist that everything is fine, but the fact that Keir Starmer has repeatedly refused to say whether Rachel Reeves will remain as chancellor speaks volumes.

“The markets and businesses are watching, Labour promised stability and confidence but they have lost control. They must take action to reverse before this gets worse for families.”