Closing summary
Reeves has announced that the government is accepting public sector pay review recommendations in full. The awards include 5.5% for teachers, 6% for members of the armed forces, 5% for prison officers, 6% for judges and 5% for senior civil servants.
We are going to close this blog now but you can read our report on today’s announcement from the chancellor here:
Rachel Reeves has now finished speaking so we will be bringing you a summary and wrapping up shortly.
Reeves is asked what other health workers can expect following the offer of a big rise for junior doctors. After hailing Wes Streeting for agreeing the deal, which she says had eluded Tory health ministers for months, she says the government will accept all the recommendations from the pay review bodies for other health workers.
Reeves says attempts by previous cabinet ministers to blame civil servants for what she terms “their mistakes, their cover-up” are “incredibly disrespectful”.
The chancellor said: “In the end, civil servants advise and ministers decide. And ministers made decisions to sign off spending without any idea of how it was going to be paid for.”
The chancellor was asked if she was “picking on pensioners”. She is also asked if the triple lock that protects pensions would be at risk come October.
The triple lock means that pensions rise either matching the rate of inflation, average earnings or 2.5%, whichever is higher, but Reeves said that the government will maintain the triple lock.
Up to 2m pensioners who need winter fuel payment will lose it under Reeves's plan, Age UK says
Here is the statement mentioned in the press conference from Age UK on the decision to cut the winter fuel payment. Caroline Abrahams, director of the charity, said:
We strongly oppose the means-testing of Winter Fuel Payment (WFP) because our initial estimate is that as many as two million pensioners who badly need the money to stay warm this winter will not receive it and will be in trouble as a result – yet at the other end of the spectrum well-off older people will scarcely notice the difference – a social injustice.
A big reason for this disastrous outcome is that more than one in three pensioners entitled to Pension Credit, the qualifying benefit for WFP under this proposal, don’t receive it, a proportion that’s been roughly constant for many years. More than 800,000 older people living on very low incomes – under £218.25 a week for single pensioners and under £332.95 for couples – who are already missing out of the Pension Credit they are entitled to get to boost their incomes, will now lose the WFP that helps them to pay their fuel bills.
In addition, there are also about a million pensioners whose weekly incomes are less than £50 per week above the poverty line, who will also be hit hard by the loss of the Payment. Older people in this group often tell us they really struggle financially; the proposed change will make it even harder for them to afford to stay warm when it gets chilly.
Finally, there is a third group who will find it extremely difficult to heat their homes adequately this winter as a result of the proposed change: older people whose incomes are a little higher though still limited, but who live in energy inefficient homes and/or who are seriously unwell and need to keep the thermostat turned up high in order to protect their health.
My colleague Vicky Graham is taking over now.
Asked to confirm that she will be raising taxes in the autumn budget, Reeves sidesteps the questions. But she restates the commitment not to raise income tax, national insurance or VAT, and insists that she remains determined not to raise taxes for working people.
The first question at the press conference comes from Sam Coates from Sky News. He says Age UK say two million pensioners who need it will lose the winter fuel payment. But junior doctors are getting a 20% pay rise. What does that say about Rachel Reeves’ priorities?
Reeves says it is important to settle the junior doctors’ pay strike. She says cutting winter fuel payments was a difficult decision. But she says it is right to priorities help for the poorest and to encourage increased take-up.
Rachel Reeves has just started speaking at her Treasury news conference. There is a live feed at the top of the blog.
She starts with a summary of what she told MPs at 3.30pm.
Institute for Fiscal Studies some revelations about hidden Tory spending policies 'shocking'
The two most prominent public spending thinktanks have now published their responses to the Rachel Reeves statement.
The Institute for Fiscal Studies says Reeves was entitled to feel aggrieved, because some of the details of the spending inheritance were “shocking”. Paul Johnson, its director, says:
Rachel Reeves is within her rights to feel somewhat aggrieved. It was always clear and obvious that the spending plans she inherited were incompatible with Labour’s ambitions for public services, and that more cash would be required eventually. But the extent of the in-year funding pressures does genuinely appear to be greater than could be discerned from the outside, which only adds to the scale of the problem …
Nonetheless, some of the specifics are indeed shocking, and raise some difficult questions for the last government. If the scale of these overspends and spending pressures was apparent in the spring – and in lots of cases, there’s no reason to suppose otherwise – then it is hard to understand why they weren’t made clear or dealt with in the spring budget. Jeremy Hunt’s £10bn cut to national insurance looks ever less defensible. On asylum costs, the decision to effectively stop processing claimants, and to budget virtually nothing for the resultant costs of housing them, looks like very poor policy making. The new chancellor is right to be cross.
And the Resolution Foundation says this announcement will make the budget in the autumn even more difficult. It says:
Today’s assessment looked only at spending pressures in the current year, but many of these, including the extra spending on public sector pay (£9.4bn), will continue throughout this parliament. As a result, even after today’s new cuts to public spending, the foundation notes that the chancellor faces a huge challenge to bring down public sector debt without cutting unprotected departmental spending by more than the £18bn a year already pencilled in to the government finances – or adding to the £23bn a year tax rises announced by the previous government that have not yet come into force.
The chancellor’s challenge in the autumn budget will become even more severe if she wishes to maintain even modest fiscal buffers – or if bad news about the growth or interest rates materialise in the Office for Budget Responsibility’s (OBR’s) autumn budget forecasts. If the OBR was to mark down its forecast for trend productivity growth by just 0.2 percentage points, it would blow a further £17bn hole in the public finances.
The foundation warns that, when delivering the autumn budget, the government must continue to prioritise its growth ‘mission’ and focus on increasing living standards. Today’s announcements included cuts to some transport investment and £1.5bn cuts to winter fuel payments. If this approach was repeated at the Autumn Budget, this would both hamper growth, and damage living standards.
Cutting winter fuel payments 'feels like Tory austerity', says SNP
In the Commons Sarah Olney, the Liberal Democrat Treasury spokesperson, focused mainly on criticising the last Tory government in her response to Rachel Reeves. She said:
The outgoing Conservative government will go down in the history books as one of the most damaging administrations our country has seen and today’s statement has thrown that picture into even more stark relief.
It wasn’t just their catastrophic mini budget, we saw a vicious cycle of stagnation and recession driven by years of chaos and uncertainty.
Over the last parliament we saw the Conservative Party raise taxes on hardworking households again and again just to pay for its own mistakes.
But Pete Wishart, the SNP’s deputy leader at Westminster, told MPs that cutting winter fuel payments felt like Tory austerity. He said:
Everybody and their granny knew that there would be a multibillion pound black hole, only the chancellor seemed to be deaf and blind to the situation, but we knew she was going to be here explaining the sheer scale of it.”
Isn’t it the case that cutting winter fuel payments to all pensioners seems and feels like Tory austerity? And what discussions has she had with the Scottish government? Because she will know obviously that this is a devolved responsibility.
Senior civil servants will receive a pay rise of 5%, Georgia Gould, the Cabinet Office minister, has told MPs in a written statement.
Treasury rejects Tory claims MPs were misled when asked to vote on estimates with pre-election figures last week
In the Commons Rachel Reeves has now finished her statement. After she wrapped up three Conservative MPs used points of order to say that the supply and appropriation (main estimates) bill was presented to the Commons on Thursday last week and it was based on the pre-election spending figures, not the new ones announced today. They argued that, if Rachel Reeves know on Thursday those figures were problematic, she was misleading the Commons.
The “estimates”, as they are called, are how parliament approves public spending. On Thursday the bill was passed without a debate. (The statement from Reeves today shows why “estimates” really is the operative word for these figures.)
In the Commons Caroline Nokes, the new deputy speaker who was in the chair, dismissed the points of order, saying it was for the government to decide how it presented the estimates.
UPDATE: A Treasury source points out that the document published this afternoon addresses this point. It says the Treasury had to use the pre-election figures in the estimates to allow a vote on them to take place before recess. The report explains:
The government laid main estimates for 2024-25 before parliament on 18 July, the earliest available opportunity after the general election and considerably later than the usual timetable. These estimates were prepared before the general election, and the government was forced to lay them unchanged in order to allow them to be voted on before the summer recess. This was necessary to avoid departments experiencing cash shortages over the summer. The pressures set out in this document represent a more realistic assessment of DEL spending. As usual, departmental spending limits will be finalised at supplementary estimates.
Updated
Teachers in England to get pay rise of 5.5%, Bridget Phillipson, education secretary, says
Teachers in England will get a pay rise of 5.5%, Bridget Phillipson, the education secretary, has said. In a written statement Phillipson said:
I am today announcing that we are accepting in full the independent School Teachers’ Review Body’s (STRB) recommendations for 2024/25, implementing a substantial pay award for school teachers and leaders of 5.5% from September. This award will apply to maintained schools across all pay points and allowances, and in practice, will also be implemented in many academies at their discretion. I want to thank the STRB members for their careful consideration of the evidence presented to them.
Police officers in England and Wales to get 4.75% pay rise, Home Office says
And police officers in England and Wales will get a pay rise of 4.75%, Yvette Cooper, the home secretary, has announced. In a written statement she says:
Both the PRRB [Police Renumeration Review Body] and SSRB [Senior Salaries Review Body] recommended a consolidated increase of 4.75% to all police officer ranks and pay points with effect from 1 September 2024. The government is accepting the recommendation in full. The Home Office will provide £175m additional funding in 2024-25 to forces to help with the cost of the pay increase.
While the recommendation for a consolidated award of 4.75% is significantly above what had been budgeted for in the 2021 spending review, it is right that we accept it in full. Police officers have a crucial role to play in delivering the government’s manifesto commitments to make Britain’s streets safe and increase public visibility through neighbourhood policing.
Updated
Members of armed forces to get 6% pay rise, MoD says
The main pay award for members of the armed forces is worth 6%, the Ministry of Defence has said, although new recruits will get more. In a written ministerial statement John Healey, the defence secretary, says:
Along with various forms of support, accommodation, and pensions, pay plays a vital role in rewarding our people for the work they do. To recognise the commitment and service of our armed forces personnel, we are announcing today that we will be accepting in full the 2024 Pay Award recommendations made by the independent Armed Forces’ Pay Review Body (AFPRB) and Senior Salaries Review Body (SSRB). This year’s award provides a targeted and significant pay uplift for new recruits alongside a large headline increase of 6%.
Prison officers to get 5% pay rise, and judges 6%, justice secretary Shabana Mahmood says
Prison officers will get a pay rise worth 5% for 2024-25, Shabana Mahmood, the justice secretary, has said in a written statement to MPs. She says:
All Prison Service staff play a vital role in helping to rehabilitate prisoners and keep the public safe. I am grateful for their hard work and dedication. Acceptance of these recommendations reflects our priorities in ensuring the recruitment and retention of Prison Service staff to deliver this essential frontline service and recognises the valuable service they deliver every day.
The award will deliver a pay rise of at least a 5% base pay increase for all prison staff between Operational Support Grade and Governors (Bands 2-11), with a targeted focus on the lowest paid.
And judges will get 6%, she says. Explaining the difference, she says:
The SSRB [Senior Salaries Review Body] recommended a pay award of 6% for all judicial office holders within the remit group for 2024/25. I have decided to accept this recommendation in full, which will be applied equally to all judicial office holders for whom I have responsibility and will be backdated to April 2024.
I recognise the SSRB’s concerns regarding persistent recruitment and retention issues affecting parts of the judiciary. I look forward to working alongside the judiciary to understand how we can start to address these shortfalls through system-wide reforms going forwards.
Updated
Jill Rutter, a former Treasury official who know works at the Institute for Government thinktank, has backed up Nick Macpherson’s point. She posted this on X.
Nick is right.. Jeremy Hunt would have been apoplectic if HMT officials had shared their view of spending pressures with the Shadow Chancellor before the election as he suggested (unless he authorised it...) https://t.co/VzsD6rjCi0
— Jill Rutter (@jillongovt) July 29, 2024
Nick is right.. Jeremy Hunt would have been apoplectic if HMT officials had shared their view of spending pressures with the Shadow Chancellor before the election as he suggested (unless he authorised it...)
In the Commons Rachel Reeves, the chancellor, is still taking questions. She has just told MPs that, although she has been talking for an hour and 40 minutes, she still has not hear any Tory MP apologise for the situation they left.
Jeremy Hunt, the shadow chancellor, also claimed that Rachel Reeves should have know about the pressures on spending because she had the chance to speak to Treasury officials ahead of the election in access talks. (See 4.04pm.)
Nick Macpherson, a former Treasury permanent secretary, says Hunt is wrong about this. Officials aren’t allowed to discuss matters like that in access talks, he says.
I feel for HMT officIals. The rules precluded them sharing spending pressures with Ms Reeves ahead of the Election; the current framework precluded them discussing the realism of spending plans with the OBR. The changes to the OBR charter announced today are a big step forward.
— Nick Macpherson (@nickmacpherson2) July 29, 2024
I feel for HMT officIals. The rules precluded them sharing spending pressures with Ms Reeves ahead of the Election; the current framework precluded them discussing the realism of spending plans with the OBR. The changes to the OBR charter announced today are a big step forward.
Jeremy Hunt, the shadow chancellor, said in the chamber earlier that Paul Johnson, director of the Institute for Fiscal Studies, rejected Rachel Reeves’ claim that she did not know about the state of the public finances before the election. (See 4.04pm.)
Johnson himself says that, at least in regards to spending on asylum matters, people were kept in the dark. But he has restated his point about Reeves knowing the overall position was bleak. And he has said that accepting pay review body recommendations in full was a discretionary decision. He posted this on X about an hour ago.
1 Last govt left public finances in bad state; 2 it does appear that funding for eg asylum was not provided
— Paul Johnson (@PJTheEconomist) July 29, 2024
but 3 c. half of spending "hole" is public pay over which govt made a choice and where pressures were known; and 4 overall challenge for spending was known and remains
1 Last govt left public finances in bad state; 2 it does appear that funding for eg asylum was not provided
but 3 c. half of spending “hole” is public pay over which govt made a choice and where pressures were known; and 4 overall challenge for spending was known and remains
Ben Zaranko, another IFS economist, sounds a bit more sympathetic to Reeves. He says the finances are in a mess and Reeves is entitled to be cross.
Need to see the detail, but I think Rachel Reeves has grounds to be cross. The in-year funding pressures do genuinely appear to be greater than could be discerned from outside. The £9bn contingency ‘reserve’ has seemingly been spent several times over. It’s a mess.
— Ben Zaranko (@BenZaranko) July 29, 2024
Need to see the detail, but I think Rachel Reeves has grounds to be cross. The in-year funding pressures do genuinely appear to be greater than could be discerned from outside. The £9bn contingency ‘reserve’ has seemingly been spent several times over. It’s a mess.
OBR launches inquiry into whether Treasury gave it misleading information about cost of Tory spending plans
The Office for Budget Responsibility seems to be backing up Rachel Reeves’ claim that the last government was not open about the cost of the measures it was committed to. Richard Hughes, the OBR’s chair, has announced that he has set up an inquiry into the accuracy of the figures the OBR was given.
In a letter to the Treasury committee explaining the move, Hughes says:
In my testimony before the Treasury committee and other parliamentary committees, I have expressed my concerns about the transparency and credibility of the existing arrangements within government for forecasting, planning, and controlling the 40 per cent of public expenditure within DEL [departmental expenditure limit]. In our semi-annual EFO [economic and fiscal outlook] reports (including the March 2024 EFO) and in our August 2023 working paper on the OBR’s forecast performance, the OBR has highlighted potential overspending against the DEL plans set by the Treasury as one of the most significant risks to the fiscal outlook.
The document published today by HM Treasury entitled Fixing the foundations: Public spending audit 2024-25 identifies £21.9 billion in net pressures on the DEL budgets set by the Treasury for the current financial year 2024-25. We were made aware of the extent of these pressures at a meeting with the Treasury last week. The Treasury document also sets out its plans for further managing down these pressures over the remainder of the financial year. If a significant fraction of these pressures is ultimately accommodated through higher DEL spending in 2024-25, this would constitute one of the largest year-ahead overspends against DEL forecasts outside of the pandemic years.
Given the seriousness of this issue, I have initiated a review into the preparation of the DEL forecast in the March 2024 EFO. The review will assess the adequacy of the information and assurances provided to the OBR by the Treasury regarding departmental spending and report to Baroness Sarah Hogg, chair of the OBR’s Oversight Board, and Dame Susan Rice, chair of the OBR’s Risk Committee.
This is drafted in OBR jargon, but the message is a strong one; Hughes is suggesting the OBR was mislead by the Treasury about the true cost of the Tories’ spending plans.
Hughes has expressed his concerns about the accuracy of Treasury future spending figures in the past. In January he told the Treasury committee they were worse than a work of fiction because “someone’s bothered to write a work of fiction, whereas the government hasn’t even bothered to write down what its departmental spending plans are underpinning the plans for public services”.
In the Commons a few minutes ago Rachel Reeves said this letter was “incredibly serious”. In response to a question from Labour’s Mark Ferguson, Reeves said the letter “can leave no one in this chamber under any doubt about the seriousness of the situation”.
I have updated some of the earlier posts with with longer, direct quotes from Rachel Reeves’ statement. You may need to refresh the page to get them to appear.
Here is Peter Walker’s story on the Reeves announcement.
What Treasury says about how it will save £5.5bn this year, and £8bn next year, to fill £22bn shortfall left by Tories
And here is an extract from the Treasury report explaining how the government will save £5.5bn in 2024-25 and £8.1bn in 2025-26 to address this shortfall.
Making sure that departments absorb at least £3.2 billion of the public sector pay pressure this year. The Treasury will work closely with departments to identify savings to fund pay. To achieve this, the Treasury will help departments to bear down on waste and drive efficiency, including by:
Taking immediate action to stop all non-essential government consultancy spend in 2024-25 and halve government spending on consultancy in future years. This will save £550 million in 2024-25 and £680 million in 2025-26. To help departments do this and make value for money decisions about how to resource work the civil service headcount cap announced by the previous administration will be lifted.
Delivering administrative efficiencies across government – the Treasury will implement a 2% saving against government administration budgets, cutting down on waste while prioritising the frontline. This will save £225 million in 2024-25.
Reducing communications and marketing budgets – the government will review the hundreds of millions spent each year across government on communications and marketing campaigns, with a view to making reductions.
Continuing to dispose of surplus public sector estates, raising money for public services and enabling assets to be put to productive use where the government can increase their social value and drive greater value for money.
Targeting Winter Fuel Payments. Winter Fuel Payments will be targeted from winter 2024-25 at households in England and Wales with someone aged over State Pension age receiving Pension Credit, Universal Credit, Income Support, income-based Jobseeker’s Allowance and income-related Employment and Support Allowance. They will continue to be worth £200 for eligible households, or £300 for eligible households with someone aged over 80. This will better target support for heating costs at those who need it, while all pensioners will benefit from the government’s commitment to maintain the triple lock for the basic and new State Pension in this Parliament. Winter Fuel Payments are devolved in Scotland and Northern Ireland.
The government wants those entitled to Pension Credit to claim it. The government will bring together the administration of Pension Credit and Housing Benefit as soon as operationally possible, so that pensioner households receiving Housing Benefit also receive any Pension Credit that they are entitled to. The Department for Work and Pensions will continue to work with partners to encourage take-up alongside their own communication campaigns and to support people with their Pension Credit claims.
Stopping the Rwanda migration partnership. This will create savings on flights and payments to Rwanda, and removing retrospection of the Illegal Migration Act will allow the government to process asylum seekers and reduce use of hotels.
Cancelling the Investment Opportunity Fund. This was announced at Autumn Statement 2023 but has yet to support any projects this academic year.
Not proceeding with adult social care charging reforms. The previous government committed to introduce these in October 2025 but did not put money aside for them. The reforms are now impossible to deliver in full to previously announced timeframes.
Reviewing the previous government’s transport commitments. This will ensure our transport infrastructure portfolio drives economic growth and delivers value for money for taxpayers. The government is cancelling the A303 Stonehenge tunnel and the A27 schemes. These are low value, unaffordable commitments which would have cost £587 million next year. The government will also cancel the Restoring Your Railway programme, saving £76 million next year. Individual Restoring Your Railway projects will be able to be reconsidered through the Transport Secretary’s review.
Cancelling the Advanced British Standard. The government will cancel the unfunded commitment to additional teaching hours, which would have cost almost £1 billion a year in the medium term. The government will continue to fund more and better maths teaching, additional funding to support young people resitting maths and English GCSEs, and teacher recruitment and retention incentives in 2024-25 and 2025-26.
Reviewing the New Hospital Programme and the previous government’s ‘40 hospitals by 2030’ commitment. The government will put the programme on a more sustainable footing, following persistent delays and overruns, and recognising delivery and market constraints. The government is undertaking a full and comprehensive review of the programme while continuing to deliver the most advanced and most urgent hospitals to a realistic timeframe.
Here is the chart from the report explaining how the Treasury has come up with the figure of £22bn for the size of the “black hole” in spending plans for this year.
The Treasury has now published its “Fixing the foundations: public sector audit 2024-25” report on its website.
Hunt asks Reeves to confirm that about half the “black hole” she has identified comes from her decision to accept the public sector pay body recommendations.
That decision was discretionary, he says. He says the government does not have to accept those recommendations.
And he says, apart from the one for teachers’ pay, the other recommendations did not arrive until after the election.
He asks if Reeves has made allowance for government underspends – normally about ££12bn a year.
And he asks is Reeves is planning any welfare savings, or any efficiency savings, that might also save the government billions.
He says the Tories were willing to take difficult decisions on pay, spending and welfare reform that would have made their plans affordable.
He accuses Reeves of hiding her plans to put up taxes.
And she says she has already announced extra spending worth £24bn. That is almost £1bn per day she has been in office.
He says this is a mistake, because being chancellor depends on trust.
(This prompts some jeering from Labour MPs.)
He ends by saying Reeves’ first budget will be the biggest betrayal by a new chancellor.
Hunt says Reeves claimed she would take power with the worst economic inheritance for 80 years.
But he quotes an academic saying: “I struggle to find a metric that would make that statement correct.”
Jeremy Hunt accuses Reeves of 'shameless attempt' to prepare ground for tax rises
Jeremy Hunt, the shadow chancellor, is responding. He accuses Reeves of “a shameless attempt” to prepare the ground for tax rises.
He quotes Reeves saying before the election she knew the state of the public finances. He says people like Paul Johnson from the Institute for Fiscal Studies have also said this.
He says the Office for Budget Responsibility audited the government’s figures shortly before the election.
And he says that Reeves had access to the Treasury permanent secretary, as part of the routine access talks the opposition has with civil servants ahead of the election. She could have asked him about the public finances, he says.
Reeves says the Tories “spent like there was no tomorrow because they know someone else would pick up the bill”.
And at the election they did this all over again, she says.
She says she will never do that. She will make the tough choices, and fix the foundations of Britain to make ever part of the country better off.
UPDATE: Reeves said:
The inheritance from the previous government is unforgivable.
After the chaos of ‘partygate’, when they knew trust in politics was at an all-time low, they gave false hope to Britain. When people were already being hurt by their cost-of-living crisis, they promised solutions that they knew could never be paid for.
Roads that would never be built. Public transport that would never arrive. Hospitals that would never treat a single patient.
They spent like there was no tomorrow, because they knew that someone else would pick up the bill and then in the election – and perhaps this is the most shocking part – they campaigned on a platform to do it all over again.
Updated
Reeves says he will set up a new Office of Value for Money, to make public spending more effective.
And she will appoint a commissioner to recover money spent on Covid contracts that was not justified, she says.
Reeves shelves plan to impose cap on adult social care charges
Reeves said adult social care charging reforms delayed by the Tories (imposing a cap on how much people have to pay for adult social care) will not be taken forward, saving more than £1bn by the end of next year.
Updated
Reeves says she is launching a multi-year spending review. That will allow more long-term planning, she says.
Final budgets for this year, and for next year, will be announced alongside the budget on 30 October, she says.
Reeves suggests budget, on 30 October, will involve tax rises and cuts to spending and benefits
Reeves says she will hold a budget on October 30.
That will involve “taking difficult decisons .. across spending, welfare and tax”, she says.
Reeves says winter fuel payments to be restricted to poorer pensioners
Reeves says pensioners not in receipt of pension credit will no longer get the winter fuel payment.
That means it will only go to poorer pensioners.
She says this is not a decision she wanted or expected to make.
But this is an urgent decision she has to make.
UPDATE: Reeves said:
This level of overspend is not sustainable. Left unchecked, it is a risk to economic stability and, unlike the party opposite, I will never take risks with our country’s economic stability.
So, it therefore falls to us to take the difficult decisions now to make further in-year savings. The scale of the situation we are dealing with means incredibly tough choices.
I repeat today the commitment that we made in our manifesto to protect the triple-lock but today I am making the difficult decision that those not in receipt of pension credit or certain other means-tested benefits will no longer receive the winter fuel payment from this year onwards.
The government will continue to provide winter fuel payments worth £200 to households receiving pension credit or £300 to households in receipt of pension credit with someone over the age of 80. Let me be clear, this is not a decision I wanted to make, nor is it the one I expected to make – but these are the necessary and urgent decisions that I must make.
Updated
Reeves says she is abandoning the Tories’ plans to sell remaining shares in NatWest owned by the government to the public.
Reeves says Sunak's plan for new educational qualification to be scrapped, because he set aside no money for it
Reeves says, even though Rishi Sunak was personally committed to the advanced British standard (a new educational qualification, replacing A levels, ensuring all pupils study maths up ot the age of 18), he did not set aside any money for it.
So she is cancelling it, she says.
Updated
Reeves says implementing pay review body recommendations will cost extra £9bn not funded under Tory plans
Reeves says the pay review body recommendations will come at an additional cost of £9bn, because the last government had not said what was affordable.
She says she is asking departments to find £3bn to help the new government meet these recommendations.
UPDATE: Reeves said:
I have today set out our decision to meet the recommendation of the pay review bodies. Because the previous government failed to prepare for these recommendations in their departmental budgets, they come at an additional cost of £9 billion this year.
So, the first difficult choice I am making is to ask all departments to find savings to absorb as much of this as possible, totalling at least £3 billion.
To support departments as they do this, I will work with them to find savings ahead of the autumn budget, including through measures to stop all non-essential spending on consultancy and Government communications, and I am taking action to ask departments to find 2% savings in their back office costs.
Updated
Reeves says Tory government did not tell pay review bodies what pay settlements would be affordable
Reeves says the spending plans included £6.4bn on the asylum system due to be spent this year. That sum was unfunded and undisclosed.
She says the transport budget included commitments worth £1.6bn that were unfunded.
And, on public sector pay, she says the government had made recommenations to the pay review bodies without telling them what would affordable. That was almost unprecedented.
She confirms that the government has reached a deal with the junior doctors.
UPDATE: Reeves said:
The previous government had not held a spending review since 2021, that means they never fully reflected the impact of inflation in departmental budgets.
This has had a direct impact on budgets for public sector pay.
When the last spending review was conducted, it was assumed that pay awards would be 2% this year. Ordinarily, the Government is expected to give evidence to the pay review bodies on affordability, but, extraordinarily, this year the previous government provided no guidance on what could or could not be afforded to the pay review bodies.
This is almost unheard of but that is exactly what they did.
Updated
Reeves says she found £22bn shortfall in spending plans for this year when she became chancellor
Reeves says when she was told by officials there were unfunded commitments worth £22bn this year.
She says she will show how she will address this with measures worth £5.5bn this year, and more than £8bn next year.
UPDATE: Reeves said:
The government published its plans for day-to-day spending in the spring budget in March.
But when I arrived in the Treasury, on the very first day I was alerted by officials that this was not how much the previous government expected to spend this year – it wasn’t even close.
In fact, the total pressures on these budgets across a range of areas was an additional £35bn.
Once you account for the slippage in budgets you usually see over a year and the reserve of £9bn designed to respond to genuinely unexpected events, it means that we have inherited a projected overspend of £22bn.
A £22bn hole in the public finances now, not in the future, but now – £22bn of spending this year that was covered up by the party opposite. If left unaddressed it’d mean a 25% increase in the budget deficit this year …
Let me be clear. I’m not talking about costs for future years that (the Conservatives) signed up to but did not include, like the compensation for infected blood, which has cross-party support.
I’m not talking about the state of public services in the future, about the crisis in our prisons which they have left for us to fix.
I’m talking about the money that they were already spending this year and had no ability to pay for which they hid from the country. They had exhausted the reserve, and they knew that, but nobody else did.
They ducked the difficult decisions, they put party before country and they continued to make unfunded commitment after unfunded commitment, knowing that the money was not there, resulting in the position that we have now inherited.
The reserve spent more than three times over only three months into the financial year, and they told no-one. The scale of this overspend is not sustainable. Not to act is simply not an option.
Updated
Reeves says last Tory government 'covered up' things from public
Keir Starmer is in the chamber, sitting on the front bench as Rachel Reeves starts.
Reeves starts by paying tribute to the emergency service dealing with the Southport attack.
She says she will reveal the seriousness of what has been uncovered by the assessment of the inheritance left by the Tories. She will then say what she will do about it, before talking about her long-term plans.
She says she said before the election she would face the worst economic situation facing an incoming government.
But since becoming chancellor, she has discovered things she did not know about – things covered up by the Tories.
Rachel Reeves to make statement to MPs on spending inheritance left by Tories
Rachel Reeves, the chancellor, is about to make her statement to MPs on the “spending inheritance” left by the Tories.
Here is a picture of her working on the statement earlier in her study.
Tory leadership candidates risk 'yellow card' warning if they attack opponents too aggressively, 1922 Committee chair says
Bob Blackman, chair of the Conservative 1922 Committee, has confirmed that there were six candidates in the leaders contest when nominations closed this afternoon. They are: Tom Tugendhat, James Cleverly, Mel Stride, Priti Patel, Robert Jenrick and Kemi Badenoch.
As Katy Balls from the Spectator reports, Blackman also said the 1922 Committee would impose a “yellow card” warning system on candidates deemed to have criticised their opponents too aggressively. The last proper contest, in 2022, featured numerous “blue-on-blue” attacks that were seen as very damaging to the reputation of the party as a whole.
🚨 1922 chairman Bob Blackman announces a ‘yellow card’ system for Tory leadership contest
— Katy Balls (@katyballs) July 29, 2024
Any candidate acting too aggressively or personal will receive a yellow card
Unclear if this can escalate to a red card ❌ pic.twitter.com/Rgo5fwhwdo
1922 chairman Bob Blackman announces a ‘yellow card’ system for Tory leadership contest
Any candidate acting too aggressively or personal will receive a yellow card
Unclear if this can escalate to a red card
Junior doctors’ leaders agree 22.3% pay deal over two years
Junior doctors’ leaders in England have agreed a new pay deal with the government, which could lead to their wages rising by 22.3% over two years, Andrew Gregory reports.
Hilary Benn says government starting to dismantle NI Troubles Legacy Act, but suggests replacing it will require compromise
Hilary Benn, the Northern Ireland secretary, has announced that the government is dropping an appeal against a ruling from the high court in Northern Ireland saying the last government’s Northern Ireland Troubles (Legacy and Reconciliation) Act is not compatible with the Human Rights Act. In a written ministerial statement, he says this is the first step towards repealing the act, as Labour promised in its manifesto.
He says:
The government has today written to the Northern Ireland court of appeal to formally abandon all its grounds of appeal against the section 4 Human Rights Act declarations of incompatibility made by the Northern Ireland high court in relation to the act. The declarations of incompatibility that the government is no longer challenging include those relating to the conditional immunity provisions, which could – had they not been struck out by the high court – have seen individuals being granted immunity from prosecution for providing information about Troubles-related deaths and serious injuries.
This is the first step in fulfilling the government’s manifesto commitment to repeal and replace the act. Victims and survivors have felt ignored by the previous government’s approach to legacy, which has been clearly rejected across communities in Northern Ireland. The conditional immunity provisions, in particular, have been opposed by all of the Northern Ireland political parties and by many victims and survivors, as well as being found by the court to be unlawful.
But Benn also says it would be “irresponsible” to repeal the act without having anything to replace it. And he suggests that this will not be a straightforward process. He says:
Effectively addressing the legacy of the past is hugely important, not just for those victims and survivors who continue to pursue answers, but for society in Northern Ireland to be able to move forward. The government recognises that achieving absolute consensus on these issues is immensely difficult.
Benn says the government will consult with interested parties, including victims and survivors, on the way ahead. He goes on:
The government recognises that this process will involve difficult conversations, and that many stakeholders will hold different views regarding the best way forward. It is also clear that a resolution to addressing the legacy of Northern Ireland’s past will not be reached without a willingness, by all, to listen, to understand the perspectives of others, and to compromise. The government welcomes the opportunity to have these conversations in the months ahead.
Anushka Asthana from ITV News says she has heard suggestions that Rachel Reeves might try to fill the £20bn black hole in government spending plans by cutting universal benefits for pensioners.
EXC- hearing that the government could be about to make a big move on universal benefits for pensioners. Winter Fuel Payments maybe? That costs something like £2bn a year. They need to save big and this is one way to find hefty savings.
— Anushka Asthana (@AnushkaAsthana) July 29, 2024
EXC- hearing that the government could be about to make a big move on universal benefits for pensioners. Winter Fuel Payments maybe? That costs something like £2bn a year. They need to save big and this is one way to find hefty savings.
In the past it has often been argued that giving winter fuel payments to wealthy pensioners is not a good use of public money.
During the election campaign the Conservatives argued that Labour might cut the winter fuel payment after the Labour manifesto did not include a commitment to keep it. At the time Labour said it had no plans to change this benefit.
UPDATE: This House of Commons library note has more background on the arguments for and against keeping this as a universal benefit.
Updated
In an interview this morning Pat McFadden, the Cabinet Office minister, cited the recommendation from the pay review body for teachers’ pay as an example of extra public spending hidden from the public by the Tories during the election campaign. (See 9.22am.)
In a post on his Whitehall Project Substack blog (which focuses on analysis of what the new Labour government is doing from a Tory, policy perspective), Henry Newman says he does not accept this argument. Newman, who has worked as an adviser to Boris Johnson and Michael Gove, says:
Ministers are also arguing that the last government should have dealt with these recommendations before the election. I am not convinced. The standard timetable of pay review bodies involves government writing to the body with a ‘remit letter’ – setting out the factors the government would like the pay review body to consider. For the 2023/24 pay settlement, such letters were sent in November 2022, with the bodies’ recommendations landing on ministerial desks in May and June 2023.
It’s not yet clear what the exact timetable was for the 2024/25 round, but the NHS remit letter was sent in December 2023, a month later than the previous year. Given the general election was called in mid-May this year, it probably would not have been possible for the government to respond until after the election. [Governments are banned from announcing new policies during the ‘purdah’ period before elections]. It certainly isn’t unusual for a government to respond to pay recommendations in mid to late July. In 2022, for example, the Department of Health responded on 19 July. In 2023, they responded on 13 July.
Migrant crossings hit another record high as those embarking on journeys from France to the UK shouted ‘this is for Rishi Sunak’, PA Media reports. PA says:
A migrant was heard making the declaration on Monday morning while sailing an inflatable boat down a riverway before it picked up more people from a beach near Calais and travelled onwards across the English Channel.
Footage captured by the PA news agency – just a day after another migrant died while attempting the journey to the UK – showed a group travelling on a black dinghy before reaching the sea, where dozens of migrants waded into the water at Gravelines and pulled themselves onto the crowded boat.
It comes as the latest figures show there had been a record number of crossings for the first seven months of a calendar year.
According to the Home Office, 255 migrants made the journey on Sunday, taking the provisional total for the year so far to 16,457.
The previous record for arrivals in the seven months from January to July was 16,420 in 2022, with 14,732 making the journey in the same period last year.
Suella Braverman, the former home secretary, has also written for a newspaper today about her Tory leadership intentions. In her article in the Daily Telegraph, she says she is not standing in the contest because most Tory MPs disagree with some of her strong rightwing views, which means she has no chance of winning. She says:
Although I’m grateful to the 10 MPs who wanted to nominate me for the leadership, getting onto the ballot is not enough. There is, for good or for ill, no point in someone like me running to lead the Tory party when most of the MPs disagree with my diagnosis and prescription …
I cannot run because I cannot say what people want to hear. I do not complain about this – it’s democracy in action and worked for Keir Starmer. I’ve been branded mad, bad and dangerous enough to see that the Tory party does not want to hear the truths I’ve set out.
Like Kemi Badenoch (see 11.41am), Braverman also argues that it is a mistake for the Conservative party to assume “unity” is the main solution to its problems. She says:
People talk about in-fighting. What they mean is those of us who saw this threat years ago and warned about it. But they are wrong. The reality is that we were a united party under Rishi Sunak. We MPs united to install him as PM with a coronation. Rishi never lost a vote because of Tory rebellion (save for infected blood). Precisely everything on Rishi’s agenda was nodded through: smoking bans, pedicabs, tax rises, Windsor framework and even the misguided early general election.
Max Mosley, an economist at the National Institute of Economic and Social Research, has said Rachel Reeves is entitled to argue that she did not know the full scale of the fiscal challenge facing the government until she became chancellor. (See 9.39am.)
Senior Economist @_maxmosley spoke to @Independent's @ArchieMitch_ about economic challenges and priorities for the new government 📊⬇️ ahead of the Chancellor's speech later today 💼⏰https://t.co/vxoE8bpogP pic.twitter.com/spNUPpPQdQ
— National Institute of Economic and Social Research (@NIESRorg) July 29, 2024
The Commons authorities have confirmed that the Rachel Reeves statement will start at 3.30pm. There are no urgent questions coming first. The statement is described as being about the government’s “spending inheritance”.
No 10 restates intention to come up with plan to 'put right' carer's allowance scandal
Downing Street has restated the government’s desire to address the carer’s allowance scandal, which has led to thousands of people being required to pay back large sums because they inadvertently broke the £151 weekly earnings limit when they were claiming the benefit available for unpaid carers. Stephen Timms, the minister for social security and disability, is meeting Carers UK this afternoon to discuss the problem, whch has been highlighted in many Guardian reports. At the No 10 lobby briefing the PM’s spokesperson did not say what action the government would take, and an announcement is not expected today. But the spokesperson said the government would come up with a plan. He said:
Our country would grind to a halt without the millions of carers who provide care and continuity of support to vulnerable people every day.
We recognise the challenges they’re facing and we’re determined to provide unpaid carers with the support they deserve.
The minister for pensions, social security and disability is meeting with Carers UK today to understand their experiences which will help establish the facts before setting out a plan to put it right.
No 10 says it is 'determined to bring strikes to end' after report claims junior doctors to be offered pay rise worth 20%
Downing Street has refused to comment on a report saying junior doctors are being offered a pay rise worth about 20% over two years.
In a story for the Times, Steven Swinford reports:
The British Medical Association’s (BMA) junior doctors committee has recommended an offer that includes a backdated pay rise of 4.05 per cent for 2023-24, on top of an existing increase of between 8.8 per cent and 10.3 per cent.
Junior doctors will be given a further pay rise of 6 per cent for 2024-25, which will be topped up by a consolidated £1,000 payment. This is equivalent to a pay rise of between 7 per cent and 9 per cent.
The overall package represents a pay rise of about 20 per cent. The BMA’s committee has agreed to put the offer to its members, and if it is accepted it will bring an end to industrial action.
Asked about the report at the Downing Street lobby briefing, the PM’s spokesperson said:
As we’ve said before, we’re committed to working to find a solution, resolving this dispute, but I can’t get into detailed running commentary on negotiations.
We’ve been honest with the public and the sector about the economic circumstances we face. But the government is determined to do the hard work necessary to finally bring these strikes to an end.
Rachel Reeves, the chancellor, is expected to make an announcement about public sector pay later today.
Updated
David Lammy, the foreign secretary, has told the Lebanese prime minister, Najib Mikati, the UK wants to avoid conflict widening in the Middle East after the rocket attack on the occupied Golan Heights that killed 12 children. He posted this on X.
I spoke to Prime Minister @Najib_Mikati today to express my concern at escalating tension and welcomed the Government of Lebanon’s statement urging for cessation of all violence. We both agreed that widening of conflict in the region is in nobody’s interest.
— David Lammy (@DavidLammy) July 29, 2024
I spoke to Prime Minister @Najib_Mikati today to express my concern at escalating tension and welcomed the Government of Lebanon’s statement urging for cessation of all violence. We both agreed that widening of conflict in the region is in nobody’s interest.
Puberty blockers ban imposed by Tory government is lawful, high court rules
A ban on puberty blockers introduced by the Conservative government using emergency legislation was lawful, the high court has ruled. The full story is here.
The press summary of the judgment is here.
And the full 62-page ruling is here.
In response, Wes Streeting, the health secretary, said:
Children’s healthcare must be evidence-led.
Dr Cass’s review found there was insufficient evidence that puberty blockers are safe and effective for children with gender dysphoria and gender incongruence.
We must therefore act cautiously and with care when it comes to this vulnerable group of young people.
I am working with NHS England to improve children’s gender identity services, and to set up a clinical trial to establish the evidence on puberty blockers.
I want trans people in our country to feel safe, accepted, and able to live with freedom and dignity.
Tories 'deserved to lose' election because their policy 'incoherent', says Badenoch as she launches leadership bid
Kemi Badenoch, the former business secretary, confirmed that she is standing for the Conservative party leadership with an article in the Times published last night. She was the sixth candidate to declare (the others are Tom Tugendhat, James Cleverly, Mel Stride, Priti Patel and Robert Jenrick), and no one else is expected to come forward before the deadline for nominations closes this afternoon. Badenoch is the bookmakers’ favourite, and her article is less platitudinous than some of the equivalent ones from her rivals. Here are the main points.
Badenoch says the Tories deserved to lose the general election. She says:
The electorate did not make a mistake. We deserved to lose because the past decade saw us twist and turn in the wind, unsure of who we were, what we were for and how we could build a new country …
Some will argue our loss was down to this policy, that person or some decision. The truth is our policy offer was incoherent, and we could not articulate why conservatism should matter to our fellow man. We thought we could just be managerially better at governing than the other side – a weak foundation at the best of times. Too often, we were led by focus groups.
She says the last Tory government was too leftwing. “We talked right yet governed left,” she says. In particular, it was too liberal, she argues.
We sought to build an increasingly liberal society. But liberalism has been hacked. Our empathy with those fleeing persecution has been exploited to create an asylum system that is effectively open borders to anyone willing to lie about their circumstances. Legislative improvements ensuring that everyone can be treated equally, irrespective of their race, sex or religion have morphed into a nasty identity politics that seeks to divide based on these characteristics.
Under the guise of politeness and good manners, free speech and the freedom to dissent is curtailed, exemplified by Labour scrapping the Higher Education (Freedom of Speech) Act. In its place we have a coarsening of language and promotion of a postmodernism that can best be described as joyless decadence. We must renew.
That prompted this response from the Economist’s Matthew Holehouse.
Kemi Badenoch says what the every Conservative-Labour swing voter in Nuneaton is thinking https://t.co/Mlj3PwHPPI pic.twitter.com/ZjWc6HVOXk
— Matthew Holehouse (@mattholehouse) July 28, 2024
Nadine Dorries, the former Tory minister, has claimed that Michael Gove is helping Badenoch with her speeches. (She is critical of them both.) “Postmodernism … described as joyless decadence” is the sort of phrase that makes it possible to believe she might have a point; it is very Gove.
Badenoch says the Conservative party needs to rediscover what it stands for. She says:
It would be easy to give in to the fatigue we all feel. To just focus on being a credible opposition or lose ourselves debating individual policy positions, as if we remain in government. But there is a bigger question of what it means to be a conservative today. If there wasn’t, the Reform party would not exist. It is not enough to call for “unity to win”. We need to ask ourselves, what are we uniting around? What are we winning for?
This is a dig at rivals like James Cleverly and Priti Patel who have made being ‘unity candidates’ a big part of their pitch.
Badenoch says she wants the state to do less than it does now. She says:
We will renew by starting from first principles: we can’t control immigration until we reconfirm our belief in the nation state and the sovereign duty it has, above all else, to serve its own citizens. Our public services will never fully recover from the pandemic until we remember that government should do some things well, not everything badly.
She says she wants to renew capitalism. She says:
The wealth of our nation is built upon our historic ability to capture the ingenuity and industry of our people, and the willingness of many to trade risk for reward. It’s become a dirty word, but our renewal must also mean a renewal for capitalism.
She suggests she wants to let members play a bigger role in making policy. She says:
Presidential politics don’t work in the UK. Conservatism must become a team effort once again as we renew our party from top to bottom. A new respect for our members who, in their daily lives, are the backbone of communities across our country but are sneered at and pilloried by elitist commentators. We need to do right by our local councillors, many who ran successful councils but lost their seats because of behaviours in parliament.
It is not clear whether Badenoch is implying any formal changes to the way the party makes politics, or whether she is just buttering up the voters who will have the final say in the election. Commentators have been critical of Conservative party members, but that is mainly because they thought Liz Truss would be a good prime minister.
Torsten Bell, the new Labour MP who used to run the Resolution Foundation thinktank and who is now parliamentary private secretary to Pat McFadden, the Cabinet Office minister, has posted this on X saying it would be wrong to describe what Rachel Reeves is announcing today as cuts to public spending.
Public service notice (given lots of confused coverage this morning): you’re not “cutting public spending” if you’re not changing any budgets but instead revealing that the previous government announced transport schemes without the budgets to make them happen
— Torsten Bell (@TorstenBell) July 29, 2024
Public service notice (given lots of confused coverage this morning): you’re not “cutting public spending” if you’re not changing any budgets but instead revealing that the previous government announced transport schemes without the budgets to make them happen
Bell has posted this in response to way some of the stories on the announcement (including ours) have been framed.
Updated
George Grylls in the Times says Rachel Reeves, the chancellor, could raise £500m by selling empty public buildings and reducing the government’s use of consultants. He reports:
As part of an immediate squeeze, [Reeves] will accelerate the sell-off of empty public buildings and reduce the use of external consultants, a move expected to save £500m.
The sale of surplus public property – a money-raising policy championed by [former Tory chancellor George] Osborne – has generated £3bn for the exchequer since 2010. Government reliance on consultants dramatically increased after Brexit and during the pandemic. Since the last election, Deloitte has won contracts worth £1.9bn while its rivals, KPMG, EY and PwC, have earned £1.3bn, £1.03bn and £1bn respectively.
The Labour party has put a post on social media confirming that today’s Treasury report will identify a “black hole” worth around £20bn in the public finances.
The Tories left Britain's finances in their worst state since the Second World War.
— The Labour Party (@UKLabour) July 29, 2024
This Labour Government will take tough decisions to deliver the long-term solutions that will make you better off. pic.twitter.com/YDO4CyDLbH
The Tories left Britain’s finances in their worst state since the Second World War.
This Labour Government will take tough decisions to deliver the long-term solutions that will make you better off.
It is worth pointing out that this £20bn “black hole” is not the same as the £20bn one identified by the Institute for Fiscal Studies after the budget in March. The IFS said the Tory government’s plans for future spending implied that “day-to-day spending on a range of public services outside of health, defence and education [where spending is ring-fenced] will fall by something like £20bn”. It said spending cuts on this scale were theoretically possible but not realistic, because in practice government would not want to slash spending to that extent.
In interviews this morning Paul Johnson, the IFS director, has also been pointing out that £20bn is the sum that could be raised if the government were to reverse the two national insurance cuts announced by Jeremy Hunt before the election. Labour has ruled out doing this.
'That is exactly the scale of the National Insurance cuts implemented just before the election'
— BBC Breakfast (@BBCBreakfast) July 29, 2024
Paul Johnson from the Institute for Fiscal Studies spoke to #BBCBreakfast as chancellor Rachel Reeves is set to announce immediate cuts aimed at plugging a £20bn black hole in the… pic.twitter.com/J2koZaTLX5
McFadden insists growth remains government's main priority despite likely infrastructure cancellations
As Aletha Adu reports, Rachel Reeves is expected to announce this afternoon that the government is cancelling or postponing various infrastructure projects because of what it has learned about unfunded spending commitments left by the last administration.
In an interview on the Today programme this morning, it was put to Pat McFadden, the Cabinet Office minister, that cancelling transport projects would ultimately hold back growth. McFadden insisted that growth remained the government’s priority. He told the programme:
Growth is the challenge for the country. Growth is the mission for the country.
We will have more to say about that later this week – for example, when we talk about how we are going to get housebuilding moving again with all the positive repercussions that has for the economy.
In everything that we do and everything that the chancellor sets out later this afternoon, the priority of growth is there.
But let me say something else about growth. We also always said that the foundation for growth was fiscal responsibility and stable public finances. That is why we talk about fixing the foundations, that is why we have to be candid with the public about the situation that we have inherited after the general election.
Updated
Stewart Wood, a Labour peer and former adviser to Gordon Brown and Ed Miliband, posted a useful thread on X yesterday explaining why, even with the Office for Budget Responsibility publishing a regular, independent assessment of government finances, ministers are still able to argue that some of what they learned about public spending after taking office came as a surprise.
This is a common view among Conservative MPs & commentators. And of course it is right in the sense that the generally dire state of public finances was known before hand. But it is a view based on a misunderstanding about what is knowable from inside & outside the Treasury. 1/3 https://t.co/H9doYI7T2W
— Stewart Wood (@StewartWood) July 28, 2024
This is a common view among Conservative MPs & commentators. And of course it is right in the sense that the generally dire state of public finances was known before hand. But it is a view based on a misunderstanding about what is knowable from inside & outside the Treasury. 1/3
From outside we know OBR tax revenue forecasts, Govt spending plans & a sense of the gap between them. But what you have no way of knowing is the changing trajectory of costs & spending profiles for each of the myriad of things that the Government has committed to delivering. 2/3
So from oustide we have a sense of the revenue gap (gap between revenue & stated costs of Govt commitments) but no sense of the funding gap (gap between what Govt said X, Y, Z would cost & what they actually turn out to cost). Or even whether some policies are just unfunded. 3/3
Minister says Treasury statement will show Tory government was 'running away' from truth about public spending
Good morning. After three weeks as chancellor, Rachel Reeves will today present the most significant policy announcement of the new Labour government so far. Think of it as an inverse budget. Budgets are all about how the government intends to spend money. According to the extensive briefing about this statement, instead it will mostly focus on what the government won’t be spending, on projects it is cancelling because supposedly the last administration kept them on the books without having the cash to fund or finish them.
In policy terms, it will tell us more about what the government wants to prioritise. (Reeves will include recommendations from public sector pay review bodies in her list of Tory “spending black hole” measures. She is expected to accept the recommendations for above-inflation pay increases which the Tories had not approved.)
In political terms, this is an announcement intended to reinforce a narrative Labour wants the public to remember for a decade or more – that the Tories left Britain “broke and broken”.
And, in economic terms, today’s statement is widely expected to pave the way for significant tax rises in the autumn. During the election campaign Labour said it did not want to raise taxes for “working people”. But this implied that tax increases that would only affect the wealthy were in scope and the Treasury has not denied suggestions that today’s analysis could be used to justify measures like capital gains or inheritance tax rises in the budget in the autumn.
Here is Aletha Adu and Peter Walker’s preview story.
In an article for the Daily Express, Jeremy Hunt, the Tory former chancellor, has accused Reeves of being “beyond disingenuous” and of peddling “mistruths”. He argues that she cannot say that she was misled about the state of the public finances because the Office for Budget Responsibility publishes its own assessment twice a year.
Hunt also implies Labour have betrayed voters over tax (ignoring the fact that, during the election, CCHQ regularly attacked Labour for not give cast-iron commitments not to raise taxes like capital gains tax and inheritance tax).
But in interviews this morning Pat McFadden, the Cabinet Office minister, said that, since taking office, ministers had discovered new information about the government’s spending liabilities that was not publicly known before the election. He told Sky News:
What we have discovered since taking office a few weeks ago is things were even worse than we thought and the previous government was certainly guilty of running away from the situation. Let me give you a couple of examples.
We were told, for example, that the Rwanda scheme was going to cost £400m. We have now found that it is £700m, with billions more to be spent in future.
The government were emptying the country’s reserves to pay for other parts of their asylum policy.
In addition to that, the secretary of state for education had a pay offer for teachers on her desk that nobody told anyone about during the election.
When you take up all of this, and you add it all up, it adds to significant pressures on the budget this year which we have to react to.
And, in an interview with the Today programme, McFadden accused Hunt himself of not telling the truth about tax policy during the election. McFadden said:
One of the very revealing things that has happened since the election is that the now shadow chancellor, Jeremy Hunt, has admitted to his shadow cabinet that that £17bn pounds of unfunded tax cut promises at the heart of the Tory manifesto could not have been implemented this year. That is not what they were saying during the election. It is a profoundly revealing admission. And it shows that they knew more about the public spending situation during the election than they were telling the electorate.
Here is the agenda for the day.
11am: The high court is due to give its judgment on a claim that the government’s emergency ban on puberty blockers is unlawful.
11.30am: Downing Street holds a lobby briefing.
2.30pm: Yvette Cooper, the home secretary, takes questions in the Commons.
2.30pm: Nominations officially close for the Conservative party leadership contest. Six candidates have already said they are standing – Tom Tugendhat, James Cleverly, Mel Stride, Priti Patel, Robert Jenrick and Kemi Badenoch – and no one else is expected to run.
After 3.30pm: Rachel Reeves, the chancellor, makes a statement to MPs on the Treasury’s “audit of the spending inheritance left by the previous administration”.
Late afternoon: Reeves holds a press conference.
If you want to contact me, please post a message below the line (BTL) or message me on X (Twitter). I can’t read all the messages BTL, but if you put “Andrew” in a message aimed at me, I am more likely to see it because I search for posts containing that word. If you want to flag something up urgently, it is best to use X; I’ll see something addressed to @AndrewSparrow very quickly. I find it very helpful when readers point out mistakes, even minor typos (no error is too small to correct). And I find your questions very interesting too. I can’t promise to reply to them all, but I will try to reply to as many as I can, either BTL or sometimes in the blog.
Updated
