Chancellor John Healey has told Cabinet ministers to identify spending cuts or reprioritise existing budgets to fund Prime Minister Andy Burnham’s new policy commitments. The move signals that the Government does not intend to provide additional funding for recent cost-of-living, devolution and education measures, placing pressure on departments ahead of the 28 October Budget.

Healey said departments must shift money from “unproductive” or outdated programmes, while also meeting demands for greater defence spending and Burnham’s devolution plans. The Government must find £5 billion for defence measures announced in May, amid warnings that the Iran war could prolong inflation and raise interest rates; economists say the Chancellor may otherwise need tax rises or reductions in welfare spending or pensions.