On Monday, Rachel Reeves will address parliament to discuss the financial challenges that the new Labour government is facing. Unlike past policies and forecasting, this spending audit is focussed on Departmental plans to identify unforeseen costs and potential cuts to public services from the previous government. This is a decisive moment for the new Chancellor and most importantly an opportunity to gain the trust of both investors and voters. Credibility is hard to obtain and even more difficult to sustain and most experts agree that convincing opponents while also controlling the political narrative will be a significant challenge for Reeves and her team.
This benchmark audit, whilst proactive, is somewhat risky, it serves as a test of the credibility of the Labour party and the reliability of previous governments. When Reeves confirms that billions of pounds of unexpected spending pressures have been uncovered, critics will want to know whether these were genuinely unexpected or merely saved by the previous government for political reasons. It is critical for Reeves to win an understanding from constituents and the financial community alike. With an audit that serves as a prelude to the new Labour government’s first budget, Reeves needs to be completely honest, presenting her party as a party that takes responsibility over the budgetary constraints it faces and is reluctant to make frivolous promises without foundation.
Yvette Cooper has stated that the ‘Conservatives Rwanda scheme’ alone cost £700m. With areas unprotected from spending cuts, the civil service has mapped out scenarios to understand the possible ramifications, including cuts to prisons, courts, universities, further education colleges and councils, including social care for adults and children. The significant amount of spending required on basic public services leaves little room for discretionary spending which is why the results of the audit have been crucial in the lead up to Reeves’ announcement.
Reeves’ approach thus far has been to prove Labour’s accountability and transparency. Unlike previous governments who were reluctant to be scrutinised, her aim is to ensure that the calculations and forecasting presented by Labour cannot be seen as unrealistic. The need for credibility through this first vital benchmark will be an ongoing challenge. Should Reeves and her team find some hidden or unexpected spending risks, it may not bode well for the remainder of the Labour government’s first term, nor its challenge to retain the trust of its voters.
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