Rachel Reeves has accused the Conservatives of having “covered up” the true state of the public finances from the country, claiming that Labour has inherited “a projected overspend” of £22bn.
The Chancellor this afternoon delivered a statement to the Commons setting out the state of Labour’s spending inheritance from the Conservatives following a Treasury assessment of the public finances. She said her party would today publish a detailed audit of the “real spending situation”.
Reeves confirmed that she will hold a Budget on October 30th and warned that the Budget “will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”. She also launched a multi-year spending review that will set departmental budgets for at least three years.
Responding for the Tories, Shadow Chancellor Jeremy Hunt declared that Reeves’ statement was “a shameless attempt to lay the ground for tax rises”, arguing: “Today’s exercise is not economic, it’s political.”
READ MORE: Sign up to our must-read daily briefing email on all things Labour
Reeves told MPs in her statement: “Upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know… things that the party opposite covered up, covered up from the opposition, covered up from this House, covered up from the country.”
She claimed that Labour has inherited “a projected overspend” of £22bn, adding: “I will today set out the necessary and urgent work that I have already done to reduce that pressure on the public finances, by £5.5bn this year and over £8bn next year.”
She said: “[The Tories] had exhausted the reserves and they knew that, but nobody else did. Yet they ducked the difficult decisions. They put party before country and they continued to make unfunded commitment after unfunded commitment knowing that the money was not there.”
“The scale of this overspend is not sustainable. Not to act is simply not an option,” the Chancellor added.
Reeves said the government will accept “in full” the recommendations of the independent pay review bodies on public sector pay, with details of awards to be published today. “That is the right decision for the people who work in and most importantly the people who use our public services,” she told MPs.
READ MORE: Junior doctors to be offered 22% pay rise, according to reports
The Chancellor argued that “it should not have taken this long to come to these decisions” on pubic sector pay, saying she will “consider options to reform the timetable for responding to the pay review bodies in the future”.
She also confirmed earlier reports that the government has agreed a pay offer to the junior doctors that the BMA is recommending to its members, adding that the Health Secretary Wes Streeting will set out further details.
Reeves claimed meeting the pay review bodies’ recommendations comes at an extra cost of £9bn this year because the previous government “failed to prepare” for the recommendations in departmental budgets.
The Chancellor said she has asked all departments to find savings “to absorb as much of this as possible”, totalling at least £3bn.
She said she will work departments to find savings ahead of the Budget, “including through measures to stop all non-essential spending on consultancy and government communications” and reducing back office costs.
The Chancellor said the spending audit revealed £1bn of “unfunded transport projects” that had been committed to next year, adding that the Transport Secretary Louise Haigh will undertake a review of the commitments and has already agreed to scrap certain road and rail projects.
READ MORE: ‘How Labour should approach the role of the OBR in government’
On the Boris Johnson-era pledge of 40 new hospitals, Reeves said: “We need to be straight with the British people about what is deliverable and what is affordable. So we will conduct a complete review of the new hospital programme, with a thorough, realistic and costed timetable for delivery.”
She declared that “the scale of the situation we are dealing with means incredibly tough choices”, announcing that pensioners not in receipt of pension credit or “certain other means-tested benefits” will no longer receive the winter fuel payment from this year onwards.
The Chancellor added: “Let me be clear. This is not a decision I wanted to make, nor is it the one that I expected to make. But these are the necessary and urgent decision that I must make.”
Reeves also announced that plans to cap social care costs, another Johnson-era policy, will be axed, a move she claimed will save over £1bn by the end of next year.
READ MORE: ‘A black hole, CQC woes, prison crisis: Tories get taste of their own medicine’
Responding to suggestions that Labour was aware of its likely inheritance prior to entering office, Reeves said: “It is not true, and let me tell you why.
“There are very clear instances of specific Budgets that were overspent and unfunded promises that were made, but that crucially, the [Office for Budget Responsibility] was not aware of for their March forecast.”
The OBR’s chair Richard Hughes has today written to the Commons Treasury committee announcing that the OBR has initiated a review into the preparation of its forecasts related to the March Budget.
He wrote that the review “will assess the adequacy of the information and assurances provided to the OBR by the Treasury regarding departmental spending”.
SHARE: If you have anything to share that we should be looking into or publishing about this story – or any other topic involving Labour or the election – contact us (strictly anonymously if you wish) at [email protected].
SUBSCRIBE: Sign up to LabourList’s morning email here for the best briefing on everything Labour, every weekday morning.
DONATE: If you value our work, please donate to become one of our supporters here and help sustain and expand our coverage.
PARTNER: If you or your organisation might be interested in partnering with us on sponsored events or content, email [email protected].
