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Reeves announces spending cuts to plug £22bn black hole in finances
UK Chancellor Rachel Reeves has announced a raft of spending cuts as the new government prepares to plug a £22bn deficit in the public finances.
In a speech to parliament that was widely reported over the weekend, Reeves called for “immediate action” to fix what Labour says was a “cover-up” by the previous government. Labour has previously said the Tories “blew the budget” during their time in office.
On Monday, Reeves said Labour faced the “worst legacy since the Second World War” and that the government had spent more than it had admitted to the public.
Reeves said the new Labour government would cut £5.5 billion in spending this year and £8 billion next year.
The news comes as the Treasury published a public finance audit. Speaking of “unfunded and undisclosed” spending, she highlighted money promised to the asylum system, including the Rwanda programme, which she said had been overspent by £6.4bn. She also noted a £1.6bn overspend on the transport budget following the industrial action.
Reeves said the new government would scrap the qualification that former Prime Minister Rishi Sunak wanted to bring in, called the Advanced British Standard. The scheme would have cost £200 million, she said.
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Reeves also said the Rwanda scheme would be scrapped and a new one would take its place under the Illegal Migration Act. The move would reduce the reliance on hotels for new asylum seekers in the UK.
She also said the £150 million Investment Opportunity Fund would be cut as “no projects have been funded” under the initiative.
Transport projects worth £1bn will also be reviewed, with work on the A303 and A27 cancelled and the Restoring Our Railway programme shelved.
Meanwhile, the sale of retail shares in banking group NatWest (NWG.L) will be canceled in favor of a more lucrative program.
Winter fuel credits will also be cut, except for families receiving pension credits. Reeves said he will work to improve the uptake of the pension credit and help identify eligible families who are not claiming it.
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Boris Johnson’s pledge to build 40 new hospitals by 2030 is also under review. Reeves said only one new project unveiled under this banner had opened to patients and only six had begun major construction activity.
Labour campaigned on a promise not to raise income tax, VAT, national insurance and corporation tax. It also said it would be in a position to reduce debt by the fifth year of government. The cuts announced on Monday could pave the way for tax increases in the government’s first budget, which is due to be announced on October 30.
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