New Chancellor Rachel Reeves has accused her predecessor, Jeremy Hunt, of failing to disclose a £22bn funding gap for the current financial year. In a statement to MPs, Reeves declared that there had been a deliberate “cover-up” by the Conservative party, putting their own interests above the needs of the country.
Based on investigations conducted by Treasury officials, Reeves revealed that the government’s reserve fund of £9bn had been depleted “more than three times over” due to overspending. She also alleged that the Office for Budget Responsibility (OBR) had been kept in the dark about these figures in the lead up to the March budget.
Reeves highlighted that a significant portion of the £22bn funding gap was a result of projected spending on the asylum system, including the controversial Rwanda scheme. She also pointed out that £9.5bn had been allocated for public sector pay awards.
Responding to these accusations, Hunt dismissed the “£22bn black hole” claim as “fictitious”.
In light of these findings, Reeves announced a series of “tough decisions” to compensate for the overspending. She stated that the government would aim to recoup £5.5bn of the funding gap this year, and a further £8bn next year. Government departments have been instructed to find combined savings of at least £3bn.
Reeves also confirmed that a budget will be held on 30 October to outline the full measures being taken to address the funding gap. She ruled out any increases in income tax, national insurance, or VAT, in line with Labour’s election manifesto. A wealth tax was also deemed off the table.
The chancellor also revealed some immediate cuts that will take effect this winter. From now on, only those on pension credits or other means-tested benefits will be eligible for winter fuel payments. The “Advanced British Standard” qualification, introduced by former PM Rishi Sunak, will also be scrapped as it was not properly funded.
Furthermore, reforms to adult social care charging will not be moving forward, saving over £1bn by the end of next year. Additionally, the “Restoring our Railways” program will be discontinued due to lack of funding. The A303 Stonehenge tunnel and A27 road upgrade schemes have also been cancelled.
In a surprise move, Reeves announced that despite the funding pressures, she will be accepting the recommendations of public sector pay bodies in full. This comes on the heels of reports that junior doctors in England were offered a 22.3% pay increase over two years.
Finally, Reeves stated that the planned retail share offer to end the taxpayer’s stake in NatWest will not proceed, as the sale would involve significant discounts and would not benefit the public purse.
The chancellor’s tough stance on addressing the funding gap has sparked debate and backlash, but she maintains that these measures are necessary for the country’s financial stability.
