The Chancellor will fund 18,000 social homes ahead of her spring statement, as welfare and departmental cuts loom large

Rachel Reeves has announced a surprise £2bn boost for affordable housing, a move insiders say is aimed at “sweetening the pill” of severe spending cuts to be unveiled in Wednesday’s spring statement. The chancellor’s cash injection, described as the “biggest boost to social and affordable housing in a generation,” will fund 18,000 new homes as part of Labour’s long-term pledge to build 1.5 million properties over the course of the parliament.

But alongside the promise of new homes, Reeves is preparing to wield the axe. The government is set to impose one of the tightest budget constraints in recent history, with the Office for Budget Responsibility (OBR) forecasting a mere £5bn in fiscal headroom. Welfare recipients are bracing for a £5bn blow through changes to personal independence payments, while Whitehall departments are expected to shed thousands of jobs and slash spending by up to 11%.

A Treasury source defended the cuts, arguing they were not akin to George Osborne’s austerity programme. “Scrapping NHS England is not austerity — it was created under austerity. This is about reform and making money work better. Welfare reforms aren’t just about savings; they aim to help people back into work,” they insisted.

Keir Starmer sought to quell growing concerns over spending reductions, telling BBC Radio 5Live that there were “no plans to alter the basics” of public expenditure. However, behind the scenes, the government is pressing ahead with deep cuts. An additional £2bn will be carved from Whitehall efficiency drives, likely surpassing the 10,000 job losses already speculated. Another £1bn is expected to be raised by bolstering tax collection efforts.

To free up further funds, some of the cuts to foreign aid will be repurposed for defence spending, sidestepping strict fiscal rules that classify defence investment as capital expenditure rather than day-to-day spending. Meanwhile, education budgets face potential reductions, though sources close to Reeves and Education Secretary Bridget Phillipson deny that free school meals are at risk.

Despite the grim economic backdrop, the government is eager to stress that its focus remains on investment. Alongside the housing pledge, Reeves has announced a £600m injection into construction skills training. Yet the Bank of England governor, Andrew Bailey, has warned that the UK faces “strong headwinds” in its bid to reignite economic growth. Speaking at Leicester University, Bailey stressed the importance of embracing artificial intelligence and trade to drive productivity, likening today’s challenges to those faced during the Industrial Revolution.

With Labour already struggling to shake off criticism that its economic policies mirror past austerity measures, Reeves’ balancing act between investment and cuts will be scrutinised closely. Whether the promise of 18,000 new homes will be enough to cushion the political impact of looming welfare and departmental cuts remains to be seen.

THE TELEGRAPH

Rachel Reeves is set to announce £2 billion for social housing to appease Labour’s Left over spending cuts. The funding will support 18,000 new homes, contributing to Labour’s 1.5 million homes target by 2029.

The move follows backlash against welfare cuts saving £5bn annually, with MPs Jon Trickett and Rachael Maskell criticising Reeves’ fiscal rules. Trickett argues tight spending limits contradict Labour’s growth strategy, while Maskell warns against mimicking Tory austerity.

The OBR is expected to halve its 2025 growth forecast, prompting further funding announcements in June. Angela Rayner framed the investment as tackling the housing crisis, while Reeves positioned it as an economic growth driver.

With internal dissent brewing, Labour hopes the pledge reassures MPs questioning its commitment to traditional values amid fiscal tightening.

BLOOMBERG

Chancellor Rachel Reeves has announced £2 billion in grants to build 18,000 social homes as part of Labour’s push to deliver 1.5 million new residences by 2029. The funding is aimed at projects starting by March 2027, with construction expected to finish by the next election.

The move follows backlash over welfare cuts, with Left-wing MPs criticising Reeves’ strict fiscal approach. Critics argue spending constraints undermine economic growth, while others question Labour’s ability to meet its ambitious housing targets.

Reeves framed the investment as a driver for jobs and economic recovery, while Deputy PM Angela Rayner highlighted its role in tackling the housing crisis. However, with economic growth forecasts downgraded, Labour faces increasing pressure to ease fiscal rules and increase spending.