The UK chancellor is due to announce immediate cuts worth billions of pounds in order to plug a £20bn black hole in finances. Rachel Reeves’ plans are expected to include reduced spending on external consultants, a drive to cut public sector waste, and the cancellation of some road and rail projects. She is expected to accuse the previous government of covering up shortfalls in departmental budgets. The conservative party, however, has stated that the chancellor’s message has been designed to con the British public so that she can raise taxes.
A Treasury internal audit of public finances is set to be published and is expected to show a gap of around £20bn between tax revenues coming in and anticipated spending. The chancellor is expected to tell parliament that immediate action is required to restore economic stability and fix the foundations of the economy. Potential projects such as the road tunnel under Stonehenge, Boris Johnson’s new hospital program and the Euston section of HS2 could be paused or cancelled.
Economists had warned ahead of the election that the numbers did not add up and that the new government would face a stark choice between raising taxes, cutting spending, or abandoning commitments to reduce debt. However, the new government states that the situation is even worse than anticipated, describing it as catastrophic. Reeves will initiate the process for a spending review, which looks at departmental budgets over the longer term, and invite the Office for Budget Responsibility to assess the public finances. She will also suggest that the cost of funding deals should be weighed against the cost of the disruption to the economy from strikes.
Reeves is expected to announce that some public sector workers will receive pay rises in line with the recommendations of independent pay review bodies. This would include above-inflation settlements for teachers, members of the armed forces, and prison staff, among others. Instead, the government aims to identify and recommend savings, including in the current financial year, so that poor value spending is stopped before it begins.
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