Chancellor Rachel Reeves will address Parliament on Monday and announce significant cuts to address a £20bn budget deficit. The measures will include canceling various projects and reducing spending on external consultants, alongside efforts to reduce public sector waste.
Accusations Against Previous Government Reeves
Reeves will accuse the previous government of “covering up” budget shortfalls and then “running away.” The Conservative Party has countered, claiming the chancellor’s message aims to “con the British public” to justify potential tax increases.
Treasury Audit Findings Reeves
An internal audit through the Treasury, to be posted Monday, is predicted to expose a £20bn hole between tax sales and projected spending. Reeves will emphasize the need for “instantaneous movement” to repair economic stability and “restore the foundations of our economic system.”
Projects at Risk
Projects that can be paused or canceled include the Stonehenge tunnel and the New Hospital program initiated by Boris Johnson. Leading economists had warned pre-election that the new authorities would need to choose among elevating taxes, slicing spending, or abandoning debt reduction commitments. The incoming government described the situation as “catastrophic,” with unforeseen financial demands.
Reaction from Economists
Michael Saunders, senior adviser at Oxford Economics, predicts a “smaller squeeze on public spending” coupled with significant tax rises. He anticipates that the chancellor will highlight underfunded or over-budget projects as evidence of the deteriorated public finances.
Public Sector Pay Rises
Reeves is also expected to announce pay raises for some public sector workers, which aligns with recommendations from independent pay review bodies. This would mean above-inflation settlements for teachers, armed forces members, and prison staff, necessitating additional funding.
New Office for Value for Money
The chancellor will introduce a new “Office of Value for Money” to identify and recommend savings within the current financial year, aiming to eliminate poor-value spending early.
Departmental Challenges
Last week, Home Secretary Yvette Cooper highlighted that the Conservative plan to remove asylum seekers to Rwanda had cost taxpayers £700m, almost double the previously disclosed amount. Environment Secretary Steve Reed also reported that the condition of flood defenses was “far worse than we were led to believe.”
Conservative Party’s Response Reeves
The Conservative Party maintains that public finances were apparent before the election. Former Tory chancellor Jeremy Hunt accused the new government of “peddling nonsense,” claiming the economy was healthy and growing. Shadow transport secretary Helen Whately reiterated that Labour inherited a strong economy with historically low unemployment, positioning them positively.
