Labour ministers have been told to be 'disciplined on spending' and look at the 'tough choices' to fund Andy Burnham's pledges

John Healey has warned Labour ministers to prepare for budget cuts to pay for Andy Burnham's new spending pledges.

The Chancellor of the Exchequer said he and the Prime Minister have written a letter to every member of the Cabinet, urging them to rethink their budgets to pay for the Government's plans to expand technical education, devolve power to regional authorities and help with the cost of living.

He also could not rule out tax rises in his first budget - set for October 28.

Mr Healey told The Times: "We've written to the cabinet to say that if we're serious about new priorities as a second-stage Labour government we have to be serious about — and they have to be serious about — reprioritisation of their plans, their budgets.

"They need to pay for the new things they want to do this year and next year within the budgets they've already got."

In the joint letter, with the Prime Minister the Chancellor warned "tough choices" may have to be made to fund Downing Street's priorities.

"If we are serious about our new government’s priorities, we must also be serious about reprioritisation," he wrote.

"That means being disciplined on spending, looking at the tough choices and being ready to shift funding away from unproductive or legacy programmes that no longer reflect this administration’s priorities.

"Each department has a responsibility to manage within its budget, to control borrowing and help get inflation down."

The Chancellor also suggested cuts to Britain's ballooning benefits bill, warning the "inexorably rising welfare bill must be controlled".

Mr Burnham and Mr Healey have pledged to stick to Labour's fiscal rule and end borrowing to pay for day-to-day spending before 2030.

The Chancellor admitted it was a "tough time" for the UK, adding that there was pressure on prices, borrowing rates, and inflation.

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"We [need] strong financial discipline," he said. "Andy Burnham and I start from a point where our fiscal credibility is the basis of our economic stability. That is fundamental to me and my first priority as chancellor."

Mr Healey, who resigned as Defence Secretary from Sir Keir Starmer's Cabinet after a row over defence spending, published a damning letter at the time accusing the Treasury of being unwilling to "commit the resources that the nation needs to defend the country at this time of rising threats".

He previously insisted the Defence Investment Plan (Dip) must increase defence spending to three per cent of Britain's GDP by 2030, ahead of the 3.5 per cent Nato commitment by 2035.

Mr Healey could not commit to meeting the 2030 target, but hinted it would be a key part of the next spending review, due next year.

The Chancellor said the defence budget had been discussed with the Prime Minister before he entered No10 and both were committed to keeping the UK protected.

"The determination that we share is to do what’s necessary to keep the country safe, and a recognition, quite simply, of that truism, that for any government the first duty is to keep citizens safe," he said.

He again reiterated commitments to Labour's 2024 manifesto, shooting down any "hypotheticals" of increasing VAT, national insurance or income tax.

Mr Healey said he was focused on delivering an autumn budget which "keeps the momentum of the British economy going" but admitted uncertainty around the Iran war made it difficult to forecast the future.

"That’s a big moving piece for any financial planning for any future budget," he said.