The boss of a leading economic think tank has said that the “black hole” in the UK’s public finances is equivalent to the Conservative Party’s pre-election National Insurance cuts.
Former chancellor Jeremy Hunt cut National Insurance by 2p in the last spring Budget before the election, after making the exact same cut in the autumn statement last year.
The combined cuts were expected to save the average earner £900 a year.
At the time, Hunt argued that it would make the tax system fairer and help revive the economy.
In order to pay for the tax reductions, the former government insisted it was looking at further public spending cuts, to be introduced if the Conservatives had won the recent election.
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Paul Johnson, director of the Institute for Fiscal Studies, said on Monday that it was “striking” that £20 billion “black hole” is of the same scale as Hunt’s NI cuts.
Johnson told BBC Breakfast: “It is very striking that if this problem is about £20 billion big that is exactly the scale of the National Insurance cuts implemented by Jeremy Hunt just before the election.
“Now, if those cuts were implemented in the knowledge that there was this kind of hole that is not good policy to put it mildly.”
The comments precede a commons statement from Rachel Reeves on Monday, which is expected to lay the ground for cuts to public spending, tax rises and delays to some infrastructure projects in order to fill the £20 billion “hole” in the nation’s finances.
Reeves will also announce an “office of value for money”, a body that will use civil service resources to identify and recommend savings for the current financial year.
Labour’s manifesto committed not to raise taxes on working people, relying instead on economic growth to improve government funds.
Labour has ruled out increases in income tax, VAT, national insurance and corporation tax, leaving changes to capital gains tax, inheritance tax and pensions relief on the table.
Speaking on Monday, Reeves will accuse the previous Conservative government of having “covered up” the state of public finances.
The chancellor will also reveal the date of this year’s budget, amid speculation Labour is considering raising taxes in that fiscal event.
Reeves is expected to say: “It is time to level with the public and tell them the truth.
“The previous government refused to take the difficult decisions. They covered up the true state of the public finances. And then they ran away. I will never do that.
“The British people voted for change and we will deliver that change. I will restore economic stability. I will never stand by and let this happen again.”
Responding, shadow exchequer secretary to the Treasury Gareth Davies accused Labour of “trying to con the British public into accepting … tax rises”.
Josh Self is Editor of Politics.co.uk, follow him on X/Twitter here.
Politics.co.uk is the UK’s leading digital-only political website. Subscribe to our daily newsletter for all the latest election news and analysis.
