Has the Labour Party really found itself in a bigger financial mess than it bargained for?

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• Author, Nick Eardley
• Function, Political correspondent

• 1 hour ago

The new Labour government has been in power for just over three weeks.

At the time, ministers said government departments were in a much worse state than they had imagined.

On Monday, the chancellor will argue that public finances are in a bad state – and that will mean tough decisions.

To use Westminster jargon, she is rolling the dice for announcements that may not be popular. But how much of what the government is tackling is actually a surprise? And how much are these ministers trying to shape the political narrative?

The first thing to highlight is that we already had a good idea of ​​the state of the country’s books. The Office for Budget Responsibility (OBR) publishes them twice a year – the last time we got a full breakdown was last November.

We also knew during the election campaign that difficult decisions lay ahead.

Treasury sources say there have been surprises since they took over.

One is that public sector pay settlements are likely to cost much more than expected.

The last government budgeted a smaller 2% deal, sources say, so funding the much larger deal will cost billions of pounds. If a similar increase were to happen in the public sector, it would cost billions more.

While some of that money went to pay civil servants who would have been working for the department anyway, sources say much of it was for operating costs that were only discovered when the new administration reviewed the books.

The Department of Health and Social Care has also warned that hospital building programmes in England are costing far more than budgeted.

Sources also said there are extra spending commitments announced after the Autumn Statement that need to be met. Expect to hear about “in-year pressures” – extra spending that needs to be allocated immediately.

‘Black Hole’

The Treasury plans to publish a full and detailed report on Monday explaining where it believes it has found a “black hole”.

At this point we can look at the calculations and see what is actually new.

But it was known before the election that whoever was in power afterwards would face great challenges.

Rachel Reeves began talking about a complicated legacy well before voting day.

“We know things are in a very bad state… You don’t have to win an election to find that out.”

It’s not just about the economy.

Ministers have pointed to other areas where they say things are worse than they expected – health Service, prisonsthe environment and much more.

It is true to say that there are major challenges with overcrowding. Senior ministers in the last government wanted action to be taken – but this was not agreed before the election.

But was it a surprise for the new government?

Justice Department sources say the system is much closer to “disaster” than they thought and that they have had little time to try to fix the problem.

The image isn’t a complete surprise, even if some specific details could have been made clearer.

Framing the narrative

So let’s get back to politics. Because a lot of this is about politics.

The new government is trying to frame the debate for years to come. It wants to argue that it has been handed such a terrible inheritance that it needs to do some very unpopular things.

He wants you to blame the Tories, not Labour.

Former Chancellor Jeremy Hunt argues that this is all nonsense and has warned that Labour is paving the way for tax rises that it failed to announce during the election campaign.

The labor strategy, however, is not new.

The Conservatives did something similar when they came to power in 2010, arguing that the ruling Labour Party had destroyed the economy and left the government short of money – which was why austerity was essential.

It’s an argument conservatives still use to this day.

And remember, the ruling Labour Party is making choices.

He promised not to raise income tax, National Insurance, VAT and corporation tax.

He said he would not borrow extra money for day-to-day expenses. He would likely choose to pay public sector workers more than inflation, in line with pay body recommendations.

So the government has possibly encountered some surprises that make its life a little more difficult.

But it’s also trying to frame the political narrative and set the stage for what comes next.

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