LONDON (AP) – New UK Chancellor of the Exchequer May claims the previous government covered up the dire state of the country’s finances as she prepares to deliver a major speech to parliament on Monday that is widely expected to lay the groundwork for higher taxes.
In extracts of her speech published late Sunday, Rachel Reeves expressed shock at the scale of the problems she uncovered following a department-by-department review of public spending that she was tasked with carrying out shortly after taking office three weeks ago. In a post on social media platform X on Monday, Labour confirmed that the Treasury review had identified a £20 billion ($26 billion) shortfall in the public finances.
“It is time to come clean with the public and tell them the truth,” Reeves will tell the Commons. “The previous government refused to take the tough decisions. It hid the true state of the public finances. Then it ran away.”
prime minister Keir Starmer The left-leaning Labour Party won a landslide election victory earlier this month, ending 14 years of Conservative rule. During the campaign, critics accused both parties of a “conspiracy of silence” about the scale of the financial challenges facing the next government.
Labour campaigned on a promise not to raise taxes on “workers”, saying its policies would lead to faster economic growth and generate much-needed extra revenue for the government. Meanwhile, the Conservatives have promised further tax cuts in the autumn if they return to power.
As evidence that the previous government was not honest about the challenges facing Britain, Starmer’s office highlighted recent comments by former Chancellor of the Exchequer Jeremy Hunt, who said he would not have been able to cut taxes this year if the Conservatives had returned to power.
The comments came in an interview with the BBC in which Hunt also accused Labour of exaggerating the situation to justify tax increases now that they have won the election.
On July 21, Hunt said: “The reason for all the fuss about this terrible economic legacy is that Labour wants to raise taxes. If they want to raise taxes, all the figures were clear before the election… They should have been honest with the British public.”
Excerpts from Reeves’ speech did not include any mention of potential tax increases, although analysts expect any such measures will not be introduced until the government unveils its budget later this year.
Instead, Reeves focused on efforts to rein in spending, saying a new office would immediately begin identifying “wasteful spending.” She also plans to cut unnecessary spending on consultants and sell surplus property. Some transportation projects that have yet to be funded could be canceled or at least delayed.
The government says the military is “hollowed out” at a time of increasing global threats, and the NHS is “overwhelmed”, with some 7.6 million people waiting for healthcare.
Despite billions of pounds spent on housing migrants and combating criminal gangs that ferry people across the English Channel in dangerous inflatable boats, the number of people making the crossing is still rising, Starmer’s office said. Some 15,832 people have crossed the Channel in small boats already this year, up 9% on the same period in 2023.
The predicament the government finds itself in should come as no surprise, according to the Institute for Fiscal Studies, an independent think tank that focuses on British economic policy.
At the start of the election campaign, the institute said the UK was in a “critical fiscal position” and that the new government would either have to raise taxes, cut spending or relax rules on public borrowing.
On May 25, the Institute for Fiscal Studies said: “For a party to come to power and then declare that things are ‘worse than expected’ is deeply dishonest. The next government does not need to come to power to ‘open the books’. These books are published transparently and are available for all to see.”