Chancellor Rachel Reeves is set to announce big spending cuts to cover a gap in the public finances. On Monday, she will tell Parliament about cutting billions of pounds by canceling some road and rail projects, reducing spending on consultants, and cutting public sector waste. She blames the previous government for hiding budget shortfalls.
The Conservative Party, however, claims Reeves is using this message to prepare for tax increases. An internal Treasury audit will show a £20bn gap between tax revenue and spending, needing immediate action to stabilize the economy. Potentially affected projects include the Stonehenge tunnel and new hospitals.
Labour says it won’t borrow for daily costs but might borrow for investment projects like HS2. Economists warned before the election that neither party could avoid spending cuts or tax rises. The new government found the finances worse than expected, calling it “catastrophic.”
Reeves won’t suggest tax rises yet but will invite the Office for Budget Responsibility to assess the finances and start a Spending Review.
She aims to give some public sector workers, like teachers and armed forces members, pay raises in line with independent recommendations, weighing these costs against the impact of strikes.
A new “Office of Value for Money” will be created to identify and recommend savings. The Home Secretary recently revealed that the plan to send asylum seekers to Rwanda had cost nearly double the expected amount. Other departments, like Environment, found worse-than-expected conditions, such as in flood defenses.
The Conservatives argue that the state of finances was clear before the election and that the economy was strong with low unemployment. They accuse Labour of setting a narrative to justify future tax increases.
For more details, visit the BBC website.
https://www.bbc.com/news/articles/c724g07qwdwo