LONDON — Britain’s new Labour government is set to ax several transport projects Monday in order to plug what it says is a newly found 20-billion-pound shortfall in the public finances that it blames on the actions of the former Conservative administration.
In a major speech later, Treasury chief Rachel Reeves is set to accuse the previous government of covering up the dire state of the nation’s finances after a review of departmental spending that she commissioned three weeks ago after the left-leaning Labour Party won a landslide victory to return to power for the first time in 14 years.
“It is time to level 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 the difficult decisions. They covered up the true state of the public finances. And then they ran away.”
Reeves is not expected to announce any changes in taxes but her comments are being interpreted as paving the way for a revenue-raising budget in the fall.
Labour pledged during the campaign that it wouldn’t raise taxes on “working people,” saying its policies would deliver faster economic growth and generate the additional revenue needed by the government. Though higher taxes on income and sales have been ruled out, Reeves could look to raise more revenue by other means, such as closing tax loopholes, particularly on capital gains or on inheritance.
However, she is expected to keep a lid on spending, and is set to establish a new office to identify “wasteful spending.” She also plans to stop nonessential spending on consultants and sell off surplus property. Some transport projects where funding has yet to be determined could also be axed, or at least postponed. These could include scrapping a controversial tunnel near Stonehenge or extending a high-speed rail line into 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 knew full well the state of the public finances during the general election.
The Institute for Fiscal Studies, a well-respected economic think tank, had also accused both main parties during the election of a “conspiracy of silence” over the scale of the financial challenges facing the next government.
While the government is trying to keep a lid on some spending, it’s having to resolve a number of issues, which will inevitably require more money. There are hopes building 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 pay increase of 22% over two years.
Junior doctors have taken industrial action 11 times in the past 20 months. Their last strike took place from June 27 to July 2, just days before the general election.
The state of the National Health Service was one of the main debating points in the election, with Labour saying it is “broken” with some 7.6 million people waiting for care.
“An end to strikes is a crucial first step to getting the NHS back on track,” said Annie Williamson, a research fellow at the Institute For Public Policy Research and a practising NHS doctor. “Yet the government must also address the root cause of why they’ve happened in the first place.”
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