Britain’s finance minister Rachel Reeves announced on Monday (July 29) that the country’s public finances are facing a £22 billion ($28.29bn) shortfall inherited from the Conservative government.
“We have inherited a projected overspend of £22 billion ($28 billion) this year that was covered up by the party opposite,” said Reeves, who took office following Labour’s landslide victory over the Conservatives on July 4.
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Reeves, who addressed lawmakers with a detailed audit, warned that the unaddressed overspend would lead to a 25 per cent increase in the budget deficit this year. Her first budget will be presented on October 30.
“To reduce the pressure on public finances, I have already taken steps to cut spending by £5.5 billion ($7.07bn) this year and over £8.0 billion ($10.29bn) next year,” she announced.
Reeves described the overspend as “not sustainable” and slammed the previous Conservative administration under Rishi Sunak for avoiding difficult decisions.
The finance chief also noted that the Labour government, led by Prime Minister Keir Starmer, will release its first spending and taxation statement on October 30.
She added that this budget aims to “fix the foundations of our economy” and will launch a multi-year spending review to set departmental budgets for the next three years.
The Conservative opposition rejected Labour’s claims and accused the new government of using the fiscal assessment to justify upcoming tax hikes. Conservative finance spokesperson Jeremy Hunt slammed Reeves for allegedly preparing the ground for tax increases she did not disclose during the campaign.
“The audit is widely viewed as a precursor to potential infrastructure spending cuts and some tax increases, despite Labour’s campaign promise not to raise the main rates levied on workers,” said Hunt.
Media reports before Monday’s statement, including those from The Sunday Times, pointed out that Reeves’ team had identified a public finance shortfall of around £20 billion.
The UK deficit, the gap between government revenue from taxes and its expenditures, was approximately £120 billion ($154.54bn) for the fiscal year ending in March.
In response, shadow chancellor Jeremy Hunt accused Reeves of an “utterly bogus attempt to hoodwink the public” over public sector pay rises.
“In her first big moment, she breaks that trust with an utterly bogus attempt to hoodwink the public about the choices she has,” Hunt said.
“Over 50 times in the election, they told us they had no plans to raise taxes. Now in a U-turn that will forever shame this Labour government, she is laying the ground to break her word, and when she does, her first Budget will become the biggest betrayal in history by a new chancellor, and working families will never forgive her.”
(With inputs from agencies)