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UK’s new Treasury chief is ready to cut projects to plug financial hole. Hopes rise as doctors strike
LONDON (AP) — Britain’s new Labour government is expected to cut several transport projects on Monday to cover what it says is a newly discovered 20 billion pound ($26 billion) shortfall in public finances, which it blames on the actions of the former Conservative government.
In a major speech later, Treasury chief Rachel Reeves is expected to accuse the previous government of covering up the dire state of the country’s finances following a review of departmental spending she commissioned three weeks ago after the left-wing party The Labour Party won a landslide victory to return to power for the first time in 14 years.
“It’s time to be honest with the public and tell them the truth,” Reeves will tell the House of Commons, according to the Treasury. “The previous government refused to take tough decisions. They covered up the true state of the public finances. And then they ran away.”
Reeves is not expected to announce any tax changes, but his comments are being interpreted as preparation for a fall revenue budget.
The Labour Party promised during the campaign not to raise taxes on “hardworking people”, saying its policies would deliver faster economic growth and generate much-needed additional revenue for the government. While higher income and sales taxes have been ruled out, Reeves could seek to raise more revenue through other means, such as closing tax loopholes, particularly on capital gains or inheritance.
However, she is expected to keep a tight rein on spending and is set to establish a new office to identify “wasteful spending.” She also plans to cut non-essential spending on consultants and sell surplus property. Some transportation projects whose funding has not yet been determined could also be scrapped or at least postponed. That could include scrapping a controversial tunnel near Stonehenge or extending a high-speed rail line to central London.
Critics, especially her predecessor Jeremey Hunt, argue that Reeves is trying to score early political points in the new Parliament and that she was well aware of the state of public finances during the general election.
The Institute for Fiscal Studies, a respected economic think tank, also accused both main parties during the election of a “conspiracy of silence” over the scale of the financial challenges the next government will face.
As the government tries to rein in some spending, it is having to address a number of issues that will inevitably require more money. Hopes were growing on Monday that a long-running strike by doctors in England at the start of their careers may be about to be resolved, with reports indicating that so-called junior doctors have been offered a 22% pay rise over two years.
Junior doctors have gone on strike 11 times in the past 20 months. Their last attack took place from June 27 to July 2, just a few days before the general elections.
The state of the National Health Service was a key point of debate in the election, with Labour saying it was “broken” with around 7.6 million people waiting for care.
“Ending strikes is a crucial first step in getting the NHS back on track,” said Annie Williamson, a research fellow at the Institute for Public Policy Research and a practicing NHS doctor. “However, the government must also address the root cause of why they happened in the first place.”