Spending review: Home Office at risk of £500 million shortfall as Home Secretary on ‘resignation watch’

10 Jun 2025

EMBARGO: Immediate Release

Unprotected departments could be hit with real-terms cuts worth nearly £5 billion by the end of the Parliament, with the Home Office at risk of a £490 million real-terms shortfall, House of Commons Library analysis commissioned by the Liberal Democrats has revealed. This analysis ahead of the Spending Review comes amid rumours Home Secretary Yvette Cooper is now on ‘resignation watch’.

The Library used the OBR’s assumptions from the Spring Statement about the overall real-terms cuts faced by unprotected Government departments to estimate the impact on different budgets. The analysis found that unprotected departments, which are the departments excluding NHS England, the core schools budget and defence, could see real-terms cuts worth nearly £5 billion in total by 2028/29.

That comes off annual real-terms cuts of 0.8% pencilled in by the OBR, effectively taking the budgets of these departments from around £216.5 billion in 2025-26, down to roughly £211.5 billion in 2028-29, once inflation is taken into account.

Major departments could be in line for large cuts. The analysis found that the Home Office could be hit with funding cuts around £490 million over the next three years. It comes after several police chiefs said that any spending cuts could have “far reaching consequences” with some services already having been “pushed to the brink”. It is also reported that Home Secretary Yvette Cooper is on ‘resignation watch’ following the funding settlement her department has been allocated.

The unprotected elements of the Education budget covering areas such as adult education and apprenticeships could face real-terms cuts worth over £685 million by 2028-29, while councils, who are responsible for social care provision, could see their central government funding squeezed even further, with potentially £350 million in real-terms cuts to the Ministry of Housing, Communities and Local Government across the next three years.

The Liberal Democrats said that the scale of the expected cuts was “staggering” and that with public services “on their knees” the Labour government needed to take immediate steps to boost growth and avoid these spending shortfalls. Lib Dem Treasury spokesperson Daisy Cooper added, “it is no wonder that the Home Secretary is on resignation watch"' after the reporting of the funding settlement for her Department.

The party called on the Government to begin negotiations on a bespoke UK-EU Customs Union and to complete their social care review by the end of the year to get the reforms in place to fix the underlying problems in the NHS, freeing up hospital beds, ensuring people have to the care workers they need and helping family carers back into and staying in work. The review is currently scheduled to be completed in three years time.

Liberal Democrat Treasury spokesperson, Daisy Cooper MP said:

“The potential scale of these cuts at the spending review is staggering. It is no wonder the Home Secretary is on ‘resignation watch’ as the Chancellor looks to take a scythe to her department’s budget which could put frontline policing at risk.

“From social care to neighborhood policing, this Labour government is at risk of failing to deliver the change that people were promised. The best way to avoid this devastating spending squeeze is to generate meaningful growth, but the Chancellor is acting more as a handbrake rather than an accelerator.

“The Government needs to change course, negotiate a bespoke UK-EU Customs Union to slash red tape, boost our economy and the Exchequer’s coffers. And ministers must complete their social care review by the end of the year - so we can properly fix our NHS.

“Only with these measures will the Government be able to rebuild our public services and protect family finances.”

ENDS

Notes to Editors:

Figures first reported by the Independent here.

Police chiefs' comments on spending cuts can be found here.

Reporting on Yvette Cooper being on ‘resignation watch’ can be found here.

The analysis by the House of Commons Library can be found here.

Notes from the House of Commons Library accompanying the figures is as follows:

The spreadsheet attached shows the percentage change that the OBR assumed for each department, and what that would mean in both cash terms and real terms (2025/26 prices).

These are not projections of what spending will actually be for each department – the actual budgets that each department receives, and their changes in spending, will naturally vary far more widely than this. They will also probably not have the same change in spending each year; the published overall “envelope” of spending increases faster at the start of the spending review period than at the end (see section 2.1 of the Library’s research briefing Spending Review 2025: Background briefing).

Please also note the following:

The Library has assumed that any departmental spending outside one of the OBR’s identified “protected” areas counts as “unprotected” – this includes DHSC spending other than that on NHS England, and DFE spending other than the core schools budget.
The Library has also assumed that all ODA spending is allocated to the FCDO, and all FCDO spending is counted as ODA. Neither of these is accurate; in particular, a lot of ODA has been spent by other departments (notably the Home Office) in recent years. However, it’s a reasonable simplification for a rough exercise like this.
The OBR’s figures do not account for the 2025/26 reduction in ODA, which had been announced before the Spring Statement, because departmental allocations had not been agreed at that point.
The OBR’s figures cover the years between 2026/27 and 2029/30, whereas the RDEL envelope for the Spending Review only goes up to 2028/29.
No figures have been provided for Scotland, Wales and Northern Ireland, because their budgets are largely set through the Barnett formula. This in turn depends on changes in reserved and devolved spending, and the Library can’t easily predict how this will change. The Library therefore can’t apply the OBR’s assumptions in this case.
- It’s also worth noting that if the devolved administrations are included in the OBR’s “unprotected” spending category – the Library also don’t know whether this is the case, but it does appear at least plausible – then the average decrease for other departments may be even greater than the 0.79% calculated by the OBR, as funding to the devolved administrations will change in line with the changes to funding for the NHS and schools.

Source: Library estimates, based on OBR, Economic and fiscal outlook – March 2025, 26 March 2025, table 5.4 and chart 5.11