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UK faces £22bn hole in public finances: minister
Labour finance minister Rachel Reeves said the public finances would face an extra £22bn hole (-)
Labour finance minister Rachel Reeves said on Monday that public finances faced an extra £22 billion hole inherited from the Conservatives, who warned she was preparing tax hikes.
“We inherited a projected overspend of £22 billion ($28 billion) in spending … this year, which was covered up by the opposing party,” said Reeves, appointed after the centre-left Labour Party won a landslide election victory to oust the Conservatives on July 4.
“If this is not resolved, it will mean a 25 percent increase in this year’s budget deficit,” she told lawmakers, citing a detailed audit, adding that her first budget will be on Oct. 30.
“So today I will set out the urgent and necessary work I have already done to reduce the pressure on the public finances by £5.5 billion this year and more than £8 billion next year.”
Reeves said the scale of the overspending was “not sustainable” and that failing to act was “simply not an option” for the newly elected government led by Prime Minister Keir Starmer.
The previous Conservative government, led by Rishi Sunak, “avoided taking tough decisions (and) put party before country”, the finance chief added.
“They continued to make unfunded commitments, one after another, knowing the money was not there, resulting in the position we have now inherited.”
Reeves, who is the first female chancellor of the exchequer, also said her newly elected Labour government will reveal its first spending and tax statement on October 30.
“This will be a budget to fix the foundations of our economy,” she told lawmakers, adding that she was also launching a multi-year spending review to set departmental budgets for three years.
However, the main opposition Conservatives have dismissed Labour’s claims, claiming the new government is using the fiscal assessment to pave the way for tax increases.
“She will fool absolutely no one with a blatant attempt to pave the way for tax rises that she has not had the courage to tell us about,” said Conservative finance spokesman Jeremy Hunt, who was Britain’s finance minister before the general election.
The audit is widely seen as a precursor to infrastructure spending cuts and possible increases in some taxes – although Labour pledged during the election campaign that it would not increase key rates charged to workers.
Before Monday’s statement, The Sunday Times and other media outlets had already reported that Reeves’ team had identified an additional black hole in the public finances of around £20 billion.
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The UK deficit – the difference between what the government receives in taxes and what it spends – was around £120bn in the 12 months to the end of March, the country’s last financial year.
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