Rachel Reeves has accused her predecessor of hiding a “£22bn funding gap” for the current financial year, as she announced a series of “tough decisions” to compensate.
The new chancellor told MPs that the investigation she ordered into the spending plans Labour inherited following the general election found a Conservative “cover-up” that “put party ahead of country”.
Her statement, based on work by Treasury officials, not only alleged a projected overspend of £22bn this year but that information was withheld from the independent Office for Budget Responsibility (OBR) ahead of the March budget.
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Here, we set out the main accusations and what Ms Reeves is planning to do about it.
The “black hole”
The chancellor claimed the government reserve – set at just over £9bn for unforeseen spending – had been spent “more than three times over”.
Her central allegation was that the Tories had too often made spending commitments under the reserve and the OBR had been deliberately kept in the dark on the numbers involved.
She said £6.4bn of the £22bn figure for the current year had come from projected spending on the asylum system alone, including from the controversial Rwanda scheme.
There was £9.5bn for public sector pay awards also included in the funding gap figure. More on that later.
Her predecessor Jeremy Hunt called the “£22bn black hole” claim “fictitious”.
Some action now – much more later
Ms Reeves said the government would aim to recoup £5.5bn of the £22bn funding gap figure this year, and £8bn next year. Government departments have been asked to find combined savings of at least £3bn.
She confirmed there would be a budget on 30 October to set out full measures.
Rises in income tax, national insurance and VAT were ruled out, in line with Labour’s election manifesto, as was a wealth tax.
What is being cut now?
From this winter, only those on pension credits or other means-tested benefits will qualify for winter fuel payments.
Former PM Rishi Sunak’s “legacy”, the Advanced British Standard qualification, is to be scrapped as Ms Reeves said he “didn’t put aside a single penny to pay for it”.
Adult social care charging reforms will not be taken forward, saving more than £1bn by the end of next year, she said.
The Restoring our Railways programme will be scrapped as it was “unfunded”.
Ms Reeves added the A303 Stonehenge tunnel and A27 road upgrade schemes would not go ahead.
She also said that a retail share offer to end the taxpayer’s stake in NatWest would not go ahead, as such a sale would involve substantial discounts and therefore represent poor value to the public purse.
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New spending commitments
Despite the funding pressures identified by the chancellor, she confirmed she would be accepting in full the recommendations of the public sector pay bodies.
Hours earlier, it emerged that junior doctors in England had reportedly been offered a 22.3% hike over two years.