The new Labour government has been in power for just over three weeks. During this time, they’ve found the government’s finances in a worse state than expected.
On Monday, the Chancellor will say that public finances are bad, leading to tough decisions. This is to prepare people for potentially unpopular announcements.
But how much of this is a real surprise? And how much is Labour trying to shape the political story?
We already had a good idea of the country’s finances. The Office for Budget Responsibility (OBR) publishes reports twice a year, with the last one in November. During the election, there were warnings about potential tax rises or spending cuts.
Labour has discovered some unexpected costs. Public sector pay deals, like for teachers and nurses, are expected to cost more.
The previous government had budgeted for a 2% increase, but independent bodies recommended 5.5%, costing billions more. Labour also found higher costs in the Rwanda scheme and hospital building projects.
The Treasury will publish a report on Monday explaining the financial “black hole.” We knew before the election that the next government would face big challenges. Rachel Reeves mentioned this in June, saying things were in a bad state.
Ministers also found problems in areas like health, prisons, and the environment. For example, the justice secretary said some prisoners would be released early to ease overcrowding, which was worse than expected.
The new government wants to frame the debate, blaming the Conservatives for the dire situation. The former chancellor, Jeremy Hunt, argues this is nonsense and suggests Labour is preparing for tax rises not disclosed during the election.
Labour’s strategy is not new. The Conservatives did something similar in 2010, blaming Labour for economic problems and justifying austerity.
Labour has made choices, like not increasing major taxes or borrowing more for day-to-day spending. They might choose to pay public sector workers more than inflation, following pay body recommendations.
So, while Labour found some unexpected financial problems, they are also trying to shape the political story and prepare for the future.
For more details, you can check the BBC source.
https://www.bbc.com/news/articles/c9r329y9pqxo