The civil service is to be told to cut more than £2bn from its budget as part of the government’s spending review.

Chancellor Rachel Reeves is expected to unveil spending cuts during the spring statement next week – and has reportedly ruled out tax rises.

The FDA union has said the government needs to be honest about the move, first reported by The Telegraph, and the “impact it will have on public services”.

Civil service departments will first have to reduce administrative budgets by 10%, which is expected to save £1.5bn a year by 2028-29.

The following year, the reduction should be 15%, the Cabinet Office will say – a saving of £2.2bn a year.

Administrative budgets include human resources, policy advice and office management, rather than frontline services.

The chancellor has also said she won’t be putting up taxes on Wednesday, telling The Sun On Sunday: “This is not a budget. We’re not going to be doing tax raising.”

Ms Reeves added: “We did have to put up some taxes on businesses and the wealthiest in the country in the budget [in the autumn].

“We will not be doing that in the spring statement next week.”

The chancellor has repeatedly insisted she won’t drop her fiscal rules which preclude borrowing to fund day-to-day spending.

:: Rachel Reeves, Mel Stride and Daisy Cooper appear on Sunday Morning with Trevor Phillips from 8.30am

Civil service departments will receive instructions from the Chancellor of the Duchy of Lancaster Pat McFadden in the coming week, The Telegraph reported.

“To deliver our Plan for Change we will reshape the state so it is fit for the future. We cannot stick to business as usual,” a Cabinet Office source said.

“By cutting administrative costs we can target resources at frontline services – with more teachers in classrooms, extra hospital appointments and police back on the beat.”

The move comes after the government last week revealed welfare cuts it believes will save £5bn a year by the end of the decade.

Click here to listen to Electoral Dysfunction on your podcast app

FDA general secretary Dave Penman said the union welcomed a move away from “crude headcount targets” but that the distinction between the back office and frontline is “artificial”.

“Elected governments are free to decide the size of the civil service they want, but cuts of this scale and speed will inevitably have an impact on what the civil service will be able to deliver for ministers and the country…

“The budgets being cut will, for many departments, involve the majority of their staff and the £1.5bn savings mentioned equates to nearly 10% of the salary bill for the entire civil service.”

Ministers need to set out what areas of work they are prepared to stop as part of spending plans, he said.

“The idea that cuts of this scale can be delivered by cutting HR and comms teams is for the birds. This plan will require ministers to be honest with the public and their civil servants about the impact this will have on public services.”

Read more:
Analysis: UK growth forecast set for major downgrade
What could be announced in the spring statement?
The spring statement – what you need to know

Mike Clancy, general secretary of the Prospect union, warned that “a cheaper civil service is not the same as a better civil service”.

“Prospect has consistently warned government against adopting arbitrary targets for civil service headcount cuts which are more about saving money than about genuine civil service reform.

“The government say they will not fall into this trap again. But this will require a proper assessment of what the civil service will and won’t do in future.”

Lawyers for Harrods are proposing six-figure payouts to settle claims brought by sexual abuse victims of the London department store’s former owner, Mohamed al Fayed.

Sky News has learnt that MPL Legal, which is coordinating a redress scheme on behalf of the world-famous retailer, has told potential claimants that they could be eligible for general damages lump sums of up to £110,000 or £200,000, depending upon claimants’ willingness to submit to a psychiatric assessment arranged by the company.

A document seen by Sky News suggests that victims of Mr al Fayed who choose a “non-medical pathway” would be eligible for “general damages limited to compensation for sexual assault of up to £110,000”, with “aggravated damages [of] up to £15,000”, and “wrongful testing fixed payment(s) up to £7,500”.

Claimants who agree to an assessment by a scheme consultant psychiatrist – referred to in the document as the “medical pathway” – would be eligible for general damages of up to £200,000, further payments equivalent to those potentially awarded to non-medical claimants, as well as treatment costs “past and future supported by the medical report” and a “work impact payment capped at £110,000”.

The “wrongful testing” payments refer to women who were forced to undergo unnecessary and intrusive medical examinations demanded by Mr al Fayed, while the “work impact payments” relate to loss of earnings triggered by, for example, the unjustified termination of victims’ employment at Harrods.

The draft terms raise the prospect that some of the former Harrods owner’s victims could receive payments of more than £300,000.

However, the decision to impose a further psychiatric assessment in order to access the largest sums available under the scheme may anger claimants who have already endured years of psychological trauma after being abused by Mr al Fayed.

Those who opt to pursue the “medical pathway” nevertheless face a protracted wait to receive their payouts.

The MLP document said it would take up to six months to produce a medical report, after which a claimant would have 21 days to submit questions relating to it.

An offer of compensation would then be made within 35 days, it said, after which a claimant could accept the offer, appeal to an Independent Appeals Panel or leave the scheme and pursue an alternative form of redress.

The proposed terms are understood to be preliminary and subject to ongoing consultation, and will not be concluded until the end of this month, according to sources close to the process.

If the scheme is finalised along lines similar to those being consulted on, it would likely result in a total compensation bill for Harrods running to tens of millions of pounds.

The final cost of compensating victims of a man now regarded as one of Britain’s most notorious sex offenders will, though, be unclear until the number of claimants and their decisions about which compensation route to pursue have been determined.

Responding to an enquiry from Sky News this weekend, a Harrods spokesperson said: “It would be premature for us to comment on the nature and details of a scheme that is currently under consultation.

“We are actively inviting the valuable input from Survivors and their legal representatives to establish the final scheme that aims to be survivor-first, trauma-informed, and fair in its approach to compensation.

“Further updates will be provided once the consultation period is complete.”

Details are, however, expected to be finalised in the coming days.

Read more: A timeline of al Fayed sex abuse claims

According to a document published on a website set up by MPL Legal for the purposes of administering the redress scheme, “Harrods and MPL Legal are undertaking a period of consultation regarding the compensation scheme in which we will receive detailed feedback from interested parties, including several legal firms representing survivors, leading Counsel and Dame Jasvinder [Sanghera], the Independent Survivor Advocate”.

“It is anticipated the final compensation scheme will be published and survivors will be able to access application forms from 31 March 2025.”

Mr al Fayed, who died in 2023, owned Harrods for 25 years, selling it in 2010 to Qatar Holding, one of the Gulf state’s sovereign wealth funds, for £1.5bn.

His reign of terror at the Knightsbridge store is thought to have involved hundreds of predominantly young female victims, with former Fulham women’s players also alleging sexual abuse by the billionaire Egyptian.

Mr al Fayed also owned Fulham Football Club for a number of years.

The MPL Legal document seen by Sky News said the redress scheme would “provide options for survivors – an alternative route to the court process”, and that it would “hopefully avoid an adversarial approach which also risks retraumatising survivors”.

It added that the scheme would be “as inclusive as possible – we want the scheme to work for as many survivors as we can”.

Under the heading “Scheme principles”, MPL said it represented “an alternative to litigation, but a survivor can leave the scheme at any time and pursue the claim through the court system”.

It said it hoped that law firms engaging with the scheme “will ensure survivors receive 100% of the compensation”.

“The level of compensation available through the scheme has been designed to mirror the court’s approach,” it added.

Read more:
‘I had to barricade myself in bedroom during work trip’, accuser says
Ex-flight attendant says she was sacked for refusing to sleep with al Fayed

It also said there were “certain classifications of cases which may not be suitable for the scheme, for example if a survivor wishes to claim a full loss of earnings”.

Last October, lawyers acting for victims of Mr al Fayed said they had received more than 420 enquiries about potential claims, although it is unclear how many more have come forward in the six months since.

In a section headed “Eligibility”, MPL Legal said Harrods “retains discretion to review eligibility on a case by case basis”.

The date of the MPL Legal document’s creation was unclear on Saturday, but one legal source said it had been produced “recently”.

As the clock ticked down towards 12.01am Eastern Standard Time on 12 March, Liam Bates kept refreshing his browser.

Over the preceding weeks, Marcegaglia, the stainless steel company whose long products division he headed up, had rushed to melt and ship as much metal as it could from its furnaces in Sheffield across to the east coast of America, ahead of the imposition of tariffs.

Stainless steel

UK and US industrially interlocked

Of all the varieties of steel, stainless steel – an alloy of iron and chrome, along with other elements like nickel, molybdenum and carbon – is among the most important. Unlike most other iron alloys, which can rust when they encounter oxygen, stainless steel has a passive film that protects it from corrosion and can even self-heal. That makes it essential not just for use in sinks and cutlery (where most people will encounter it on a daily basis) but, arguably even more essential, in surgical instruments, heavy machinery and the pipes and ducts out of sight but essential to keeping civilisation working.

The trick of how to make stainless steel in large quantities was discovered here in Sheffield by Harry Brearley, and while the laboratories he worked for shut down long ago, the furnace at Marcegaglia, in an industrial park just outside the city, can trace a continuous thread back to him. This furnace used to be owned by British Steel, the nationalised corporation responsible for most of Britain’s steel manufacture until the days of privatisation.

Ever since the invention of stainless steel, Britain has melted, cast and exported vast quantities of the stuff to America. For all that the US has a sizeable stainless steel sector, the two countries’ stainless sectors have nonetheless been industrially interlocked since the days of Henry Ford. You can see it in the way Marcegaglia functions.

It melts down scrap in its electric arc furnace in Sheffield – an enormous cauldron whose electrodes create a storm of lightning that consumes the same power as a sizeable northern city – and adds the relevant alloy ingredients to form a long, heavy metallic bar, a billet as it’s known. That billet is then shipped across the Atlantic to the company’s other site, where the billets are processed into bars that are then sold into the North American market. It is a single economic organism, split only by an ocean.

But today that ocean and that cross-country split have become an enormous problem. The last time Donald Trump imposed tariffs on steel imports, back in 2018, so-called “intermediate” products like the billet made by Marcegaglia and then processed in America were excluded from the duties. This time around, the initial tariff rules had no such exemptions. The upshot was that any steel arriving in American ports after 12.01am Eastern Standard Time on 12 March – including Marcegaglia’s half-finished stainless billets – would incur hefty 25% tariffs.

A race against time

All of which was why Liam Bates had raced to get as much steel as possible into the US before that deadline. But as he refreshed his browser in the run-up to that deadline, he noticed two straggling shipments, still stuck on the Atlantic. The two ships, the Eva Marie and the Atlantic Star, were, between them, carrying about $12m of steel and they had been due to dock in the US on 10 or 11 March. If so, they would have avoided having to pay those 25% tariffs. But now storms and squalls were spreading across the North Atlantic. Would they stray into the ships’ path, disrupting shipping?

If the cargo arrived late, it would obliterate any margin the company hoped to make on its steel. And since those bars were destined for Marcegaglia’s own plant, the company would have to pay all those costs itself (tariffs are technically paid by the importer). Somehow, Bates had found himself helplessly witnessing an unexpected collision of politics and weather – with profound commercial consequences.

Of all the metal items Britain exports to the US, stainless steel is by far and away the biggest category. And the vast majority of that steel comes from the melt shop at Marcegaglia. But the quandary facing Liam Bates, and those companies he sells to in the US, helps illustrate the difficulties of economic policy-by-tariff.

Americans will see cost of most things go up

The prevailing theory behind the White House measures is that by raising the price of all imported metals, it will encourage domestic producers to build new production. It will help the US to reindustrialise – or so says Donald Trump. And in the long run, that might well prove right. Already, metals producers are raising money, promising to restart old, mothballed smelters. After all, if your main overseas competitors have seen their prices rise by 25%, that’s quite a competitive opportunity.

The problem is: building industrial production takes time. Marcegaglia itself is planning to replace its old furnace with a newer model, but the planning process has already taken years; the construction itself will be measured in months if not years too. In other words, even if everything goes to plan, America is very unlikely to replace imported steel with domestic production within the period of Donald Trump’s term as president.

In the meantime, American consumers will see the cost of pretty much everything going up. After all, steel – ignored or dismissed as it sometimes is – is the single most important metallic substance in the world. If something isn’t made of steel it’s made in machines made of steel. And lifting some of those steel prices by 25% will travel like an economic tidal wave through US supply chains.

UK flooded with cheap imported steel

The tidal wave is already washing back elsewhere too. With so much steel now unable to get into the US at a decent price, exporters are redeploying shipments elsewhere. All of a sudden countries like the UK are seeing a flood of cheap imported steel – good news in the short run for consumers, but disastrous for what is left of Britain’s domestic industry.

As the deadline approached and Bates nervously refreshed his live vessel tracking map, disaster struck. The squalls across the Atlantic mounted and the Eva Marie and Atlantic Star slowed nearly to a halt. By the time midnight struck and the tariffs came into place, the two vessels were still many miles off the US coast. They had lost the race. The upshot was Marcegaglia would have to pay around $4m in tariffs – about £3m.

That a company was struck with a somewhat arbitrary fee simply to pass goods from one of its factories to another might be among the most egregious examples of the collateral economic damage wrought by trade barriers, but it is likely to be the first of many perverse episodes, with consequences all around the world. For steel is not the only metal to be hit with tariffs. If anything, the drama is even greater for another metal: aluminium.

Aluminium

The world’s biggest factory – hidden in Scotland

Here’s a riddle for you: what is the biggest factory in the world?

You’re probably thinking of vast, cavernous car production lines in Michigan, of shipyards in Korea or steelworks in China. But there’s a strong case to be made that the world’s biggest factory is instead to be found deep in the Highlands of Scotland.

Not that it looks anything like a factory. To the untrained eye, it looks, instead, like heather, forests and bubbling burns of water trickling into lochs. But the 114,000 acres of estates in Lochaber and Badenoch – the third biggest rural estate in Scotland – play a crucial role in helping produce one of the most important substances in the world.

The Fort William aluminium plant sits under the shadow of Ben Nevis, the tallest peak in the United Kingdom. Once upon a time, it was just one of a constellation of smelters dotted around Scotland, that made this country, all told, one of the world’s biggest aluminium producers.

For all that it is very prevalent in the earth’s crust, aluminium used to be one of the world’s most precious metals – so much so that no one had even laid eyes on it until the 19th century. When he wanted to impress his guests, Napoleon III served them dinner not on gold plates but on aluminium.

An extraordinary metal

Why? Because aluminium is very difficult – even harder than iron – to convert from the ores you find in the ground into its metallic form. Burn iron ore hot enough, in the right kind of furnace alongside the right kind of charcoal or coal, and you eventually smelt out a form of metal. But aluminium needs a different kind of force to be persuaded to loosen its bonds and form into a pure metal – the force of electricity.

So only when the Hall-Heroult process, which allows you to smelt aluminium via electrolysis of alumina (a processed version of the bauxite you get out of the ground), was invented in 1886 did aluminium become a widely available metal. Few people talk these days about the Hall-Heroult process, but it was a breakthrough of earth-shattering proportions. Aluminium is an extraordinary metal – strong but light. And those qualities make it essential in aeronautic deployments. No aluminium, no planes.

It is no coincidence that the Wright Brothers’ plane at Kitty Hawk had an engine made out of aluminium. Steel would have weighed the glider down too much. And it’s no coincidence that powered flight happened shortly after aluminium became widely available. Without the Hall-Heroult process, the world would have been a very different place.

While the process wasn’t dreamt up in the UK, British industrialists rapidly embraced it, building smelters all over the country. But the catch with aluminium is that you can’t smelt it without a big and (this is important) very reliable supply of power. Turn off the power to those enormous carbon electrodes inside an aluminium smelter and in a matter of hours the metal at its base will solidify, effectively destroying it. More than nearly any other industrial process, this is not something you can just switch off willy-nilly, which helps explain why smelters aren’t typically dependent on variable power sources like wind and solar.

It also explains why, throughout history, these plants have been seen as some of the most important industrial locations throughout the world. The Fort William plant provided most of the aluminium used in Spitfires during WWII. It was repeatedly targeted by the Luftwaffe – indeed there is an old German bomb kept as a memento just near the turbines that power the cells here.

Some of the world’s earliest smelters were powered by hydroelectricity – most notably the ones which drew their power from the Niagara Falls plants near Buffalo, New York. But the Fort William plant was subtly but importantly different. Those other hydro plants would typically piggyback off a big dam generating power from a big river – such as the ones you find in the US or Canada, or the fjords of Norway. But none of Britain’s rivers is quite powerful enough or with a reliable enough flow to provide that kind of uninterrupted power.

Radical design

So the designers of the Fort William plant did something radical. They bought up vast stretches of the countryside around Ben Nevis (including Ben Nevis itself). And within that estate, they built a series of dams to collect the rainwater trickling down from local watersheds. Those dams weren’t there to generate power for homes – they were there to collect the water and channel it through a series of tunnels, running 16 miles through the hills and through the flanks of Ben Nevis. Then the water, collected from those 114,000 acres, feeds five pipes running down the side of the mountain which run into an enormous hydroelectric power station.

There are many aluminium smelters around the world and many hydroelectric dams. But none are quite like this one. The point being that without the estate, without all those trickling streams and heather-covered watersheds, the plant here simply wouldn’t function. It is all part of a single ecosystem.

These days the plant is connected to the national grid, meaning it also serves another function: balancing. This comes back to one of the dysfunctions of the grid: it doesn’t have enough high-voltage lines connecting Scotland, with all its wind farms, and the south. So on windy days, when there’s too much power in Scotland, instead of curtailing those farms and wasting the electricity, the plant can suck in extra power from the Scottish section of the grid and leave its water where it is as a sort of battery.

Competition from China

The problem the plant has faced is that these days aluminium is a commodity metal. And it’s becoming harder and harder to compete with the cheap metal being exported from China. China dominates the global supply of the metal, in large part because its suppliers benefit from cheap energy and generous government subsidies – neither of which are available in the UK. As the years have gone by, the workers at Fort William have watched as, one by one, every other plant in Britain was shuttered. Rumours still abound that they may eventually be next.

And, much as for Marcegaglia down in Sheffield, the tariffs on aluminium will only make life tougher for Alvance, the unit of Liberty House – part of Indian-born Sanjeev Gupta’s business empire – that now owns the Fort William plant. Arguably, the impact could be even greater. The last time Donald Trump imposed tariffs on aluminium back in 2018, the rate he chose was 10%. The difference with the steel tariff level (which was 25% then and now) reflected the fact that the US imported far more aluminium than steel. Imposing severe extra costs on it would, the White House worried, cripple the American aerospace and car businesses dependent on the metal. No such concern this time around. The tariff is 25%.

Quite how that will affect the plant here in the Scottish Highlands remains to be seen. After all, Alvance itself doesn’t sell anything directly to the US, sending its large slabs of metal to other firms in England which process and roll them into sheets and specialised components, some of which end up in the US. Perhaps, as the defence industry ratchets up in the coming years, more of that aluminium will be used by domestic industry. But what’s to stop UK manufacturers doing what they’ve been doing for years, and simply opting for the cheapest metal available, which usually comes from China? Either way, life for the last remaining aluminium plant in the UK is about to get harder, not easier.

But while the main upshot of the trade war building across the Atlantic and the Pacific will be to make both sides worse off – that, at least, is the prediction from the Organisation for Economic Co-operation and Development – that doesn’t mean there won’t be some beneficiaries in this country. For a small but important example, let’s travel from the far north of Britain to its far south.

Tungsten

UK has one of its biggest resources in world

Drive across Dartmoor, the windswept national park in the heart of Devon, and every so often you come across the remains of an old tin mine. At Fox Tor you find the remains of alluvial mining; there is Golden Dagger Mine, which ran all the way to the 1930s, as well as the hollow stone chimney of the pumping house at Wheal Betsy.

For much of the ancient era, tin – which when mixed with copper creates the alloy bronze – was what we would today call a “critical mineral”, essential for the production of the strong tools and weapons of the Bronze Age. And for centuries, the majority of Europe’s tin came from Cornwall and Devon.

That, of course, is long in the past. But just on the outskirts of Dartmoor is a site that could – just could – make this an important site for critical minerals once again. For here, beneath the soil of southwest England, is one of the world’s biggest resources of tungsten.

Tungsten among few substances on everyone’s list

Tungsten is among the 21st century’s most important critical minerals. Nearly every country has a list of these materials – the kinds of things they need to make their most important products – and the members of those lists vary by region. But tungsten is one of the few substances that feature in everyone’s list. The hardest metal in existence, with the highest melting point, it is essential in the production of hard steel tools, weapons, armour and as the electrodes inside semiconductor circuits. If you are making electronics you need tungsten. If you are going to war you need tungsten.

Perhaps it’s no coincidence that the main heyday for this mine, which contains plenty of tin as well as tungsten, was in the First and Second World Wars. Much as the Fort William plant provided aluminium for British Spitfires, Hemerdon provided the tungsten and tin needed for the weapons Britain used to fight the Nazis. But ever since then, its history has been chequered, to say the least.

It went into hibernation for decades, a sleep broken for only a single day during the Korean War. Then, a few years ago, investors tried to get it up and running again. They built a vast processing plant and began to mine the metal. But by 2019 the operation had run out of money and imploded. All that was left was an even bigger hole in the ground, a large tailings dam for waste and a hangar filled with processing equipment.

In part, the reason Hemerdon went belly-up that time was because the company made the mistake miners often make: they misjudged the type of ore they were expecting to grind through, meaning their processing plant was far less efficient than it could have been. But an even bigger challenge came back to something that will sound familiar: they were trying to compete with China.

China dominates world tungsten production – even more so than for aluminium and steel. It essentially controls the global market and, just as importantly, the tungsten price. Anyone trying to sell tungsten is contending with Chinese prices which can yo-yo for reasons no one can entirely explain. That makes it fiendishly difficult to compete.

But in recent years, new investors have begun to put fresh funds into the Hemerdon mine, hoping history will not repeat itself and this time around it can exploit that enormous ore resource. And there are at least a couple of reasons to believe (famous last words in finance) that “this time might be different”.

The first is that, in retaliation against Donald Trump’s latest metal tariffs, China has begun to put export limits on tungsten. How this will work in practice remains unclear (remember that like most markets China controls, the way tungsten sales function is almost completely opaque) but if it encourages domestic buyers to look for local suppliers, that could help the mine to find buyers. After all, in theory, it could produce a few thousand tonnes of the metal each year, which would instantly leapfrog Britain to become the world’s second or third-biggest producer (albeit a long way down from China).

Supplies matter more than ever

The second big shift comes back to defence. With the world remilitarising, all of a sudden tungsten supplies matter more than ever. And since defence suppliers pay outsized attention to where metals come from, again, that might allow a British tungsten mine to succeed where predecessors have failed.

Add to this the fact that the mine itself is nearly ready to be exploited and that the new owners reckon they’ve ironed out the problems that beset their predecessors, and it’s a compelling case. They think they could be getting metal out of the ground as soon as next year.

But those overarching challenges haven’t gone away. And nor has another, bigger problem facing the entire industry, not just in the UK but – perhaps even more so – in the US. How can you plan in a world where you just don’t know what’s coming out of the White House in the next few days, let alone the next few years?

Consider: imagine you’re a stainless steel producer or an aluminium smelter in the US. Those 25% tariffs mean all of a sudden in theory you have a competitive advantage over anyone shipping metal into the country. All of a sudden, there’s a strong case to build a smelter or a stainless steel melting shop. So you get to work looking for backers.

Uncertainty creates challenges

But building a plant like this takes time. You need to find a site, connect it to high-voltage power, and build the facilities and all the necessary infrastructure. Best case scenario: it might take a couple of years, but even that is ambitious. And as you contemplate this and map out your plans, those backers will ask you the same nagging question you’ve been asking yourself: sure, the economics of an aluminium smelter might add up today; but what if the president changes his mind tomorrow, or next year? What if those tariffs are pulled by the next president? Then, all of a sudden, the sums very much don’t add up.

All of which is to say, uncertainty around tariffs is a challenge not just for those companies hoping to ship products to America, but for American firms hoping to benefit from this trade war. And bear in mind metals are only the first chapter of what could be a long saga, which ends up engulfing all corners of American trade. These are unpredictable times, however you look at it.