Chancellor strikes late deal to break cabinet deadlock

Rachel Reeves has seen off a major crisis for Labour after conflicts within the cabinet threatened to block her spending plans for the next three years.

- MILLIE COOKE DAVID MADDOX

Just two days before she is due to unveil the spending review, the chancellor finally broke a stalemate with deputy prime minister Angela Rayner over funding for housing and local government.

However, a struggle with Yvette Cooper’s Home Office is still believed to be ongoing over proposed cuts to the police force and border control budgets.

As Ms Reeves was preparing to present her plans to parliament on Wednesday, desperation was creeping into the tense talks between the Treasury and final departments to hold out.

But the chancellor received a huge boost when sources confirmed late yesterday evening that Ms Rayner and the Ministry of Housing Communities and Local Government had settled, more than a week after a deadline set by the Treasury to conclude talks.

It comes as cabinet minister Peter Kyle yesterday morning refused to rule out real-terms spending cuts to the police force and the housing budget.

While the technology secretary warned that “every part of our society is struggling” – sending a strong signal of the government’s intent to squeeze budgets – it is understood that the Ministry of Housing was refusing to accept such an outcome before a deal was stuck yesterday evening.

The row came after The Independent revealed that the social housing sector will face a crisis if ministers press ahead with funding cuts.

The chief executive of one of Britain’s largest housing associations raised fears of a “cliff edge” over building more homes – with money set to run out by 2026.

It is unclear yet whether the sector, which includes scores of councils, will have the funding and certainty they need to start building social housing supply again.