Chancellor Rachel Reeves is set to claim the former Conservative government left a £20 billion black hole in public finances in a speech that could lay the groundwork for sweeping spending cuts in the upcoming budget.
Deputy prime minister and housing secretary Angela Rayner will also be announcing policy this week, with an overhaul of the planning rules as the government seeks to build 1.5 million homes in five years.
Ms Reeves is set to follow in the footsteps of former chancellor George Osborne, who used the Tories’ inheritance from Labour in 2010 to paint the party as having bankrupted the country.
The government will say the assessment shows “Britain is broke and broken” and reveals “the mess that populist politics has made of the economy and public services”.
She is expected to say Rishi Sunak’s government made significant funding commitments this year with no idea how they would be paid for.
Ms Reeves’ immediate predecessor, Jeremy Hunt, says the books were “wide open” during his tenure as chancellor, and accused Labour of “peddling fiction which is widely rejected by independent commentators”.
Environment secretary Steve Reed is among the guests on the BBC’s Sunday with Laura Kuenssberg, this week hosted by Victoria Derbyshire.
Shadow paymaster general ‘not embarrassed at all’ of ‘black hole’ in public finances left by Tories
09:52
Archie Mitchell
The shadow paymaster general has defended the Conservatives’ handling of public services while in government and accused Labour of “breaking all their promises” from their general election campaign.
Asked on Sunday Morning with Trevor Phillips if he was embarrassed by the “black hole” that now exists in public finances, John Glen said: “I’m not embarrassed at all. Government is about taking tough choices across a balanced set of priorities.
“What we were trying to do was prioritise working people’s tax cuts as much as we possibly could whilst maintaining investment in the NHS, long-term workforce reform plans in the NHS, the first time in its history, and continue to invest in education and public services.
“What we also said in the election campaign is that we had a very rigorous campaign to actually get more efficiencies in our public services welfare reform, getting the number of civil servants reduced, because it’s a historic high, and actually bring reformed public services, and that is the area that this Government appears to have very, very little narrative on.
“What they’re just saying is, ‘tell us the maximum amount you want to spend and we’ll raise the taxes for you’, something they explicitly ruled out 50 times during the election campaign.”
No tax hikes on working people, Labour promises
09:28
Holly Evans
Steve Reed has repeated Labour’s promise to not increase taxes on working people, ahead of a speech by Rachel Reeves expected to reveal a £20bn hole in the public finances.
With Labour expected to unveil tax rises to plug the gap, the environment secretary said the party will not put up VAT, income tax or national insurance.
But he did not rule out other tax hikes, which could include an inheritance tax shakeup and the equalising of capital gains tax with income tax.
Repeating Labour’s promise to not put up taxes on working people, he told the BBC: “The reason that we want to do that is that after 14 years of the Conservatives, we have the highest level of personal taxation on working people for 70 years, we’re in a cost of living crisis.
“This government will not seek to increase taxes on working people.”
Labour inheritance was ‘catastrophic’, Steve Reed
09:22
Archie Mitchell
Labour’s inheritance was “catastrophic”, the environment secretary has said.
Steve Reed said upon taking office ministers have seen “what is really going on” and it is worse than expected.
He was pointing to a hole in the public finances ahead of a speech by Rachel Reeves laying bare the scale of the crisis.
Mr Reed told the BBC: “There were things we could not have known during the election, because the Conservatives had not only not released the information, in some cases they had deliberately covered it up.”
Bank of England’s interest rate decision on a knife-edge, economists say
09:04
Holly Evans
The Bank of England’s next decision on interest rates sits on a “knife-edge”, experts have said, as borrowers wait to see if costs will be cut for the first time since the pandemic.
Economists are split over whether the Bank’s policymakers will decide it is the right time to reduce rates on Thursday.
The UK’s base rate has been held at 5.25% since August last year as part of the central bank’s task to put a lid on unruly inflation.
But with inflation hitting the Bank’s 2% target level for the past two months, hopes have been raised that rates can start to be reduced, easing the pressure on borrowers.
If so, it would mark the first time that UK rates have been cut since the onset of the Covid-19 pandemic in March 2020.
Reeves to consider capital gains tax plan to help fix ‘broke Britain’
08:56
Holly Evans
Rachel Reeves is considering plans to raise capital gains tax in line with income tax to help plug a £20bn hole in the public finances, according to reports.
The chancellor will be presented with proposals by Treasury officials ahead of a speech in which she will declare Britain “broke and broken” and reveal the scale of Labour’s dire financial inheritance from the Conservatives.
Another option being considered by Ms Reeves is cutting pension tax relief for middle-class workers, The Sunday Telegraph reported.
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Rachel Reeves expected to approve above-inflation pay rises for public sector workers
08:43
Holly Evans
The Chancellor is expected to approve above-inflation pay rises for millions of public sector workers in response to the recommendations of independent pay review bodies.
Teachers and some 1.3 million NHS staff could be in line for a 5.5% pay boost, which could cost about £3.5 billion more than had been budgeted for.
This could rise to about £10 billion if other pay review bodies give similar advice on workforces such as police and prisons officers and doctors and dentists, according to the Institute for Fiscal Studies (IFS).
As this cost has not been fully budgeted for in current plans, the cash would have to be raised through existing fiscal headroom, tweaking fiscal rules or tax increases.
Any tax hikes to meet those costs would not be expected before the autumn budget, the date of which Ms Reeves is also set to announce on Monday.
Labour has ruled out lifting income tax, VAT, national insurance and corporation tax, potentially leaving changes to pensions relief and capital gains and inheritance levies on the table.
Rayner’s announcement comes against backdrop of £20bn black hole
08:08
Holly Evans
Angela Rayner’s planning announcement will come as Chancellor Rachel Reeves is expected to unveil a black hole in the public finances of around £20 billion.
The Chancellor will outline the spending inheritance left by the Tories when she presents the results of a Treasury audit to Parliament on Monday.
A government spokesperson said the audit had shown “the previous government made significant funding commitments for this financial year without knowing where the money would come from”.
The spokesperson added: “The assessment will show that Britain is broke and broken – revealing the mess that populist politics has made of the economy and public services.”
Rayner to set out overhaul of planning rules to clear path to building homes
07:57
Holly Evans
Angela Rayner will unveil an overhaul of planning rules next week as Labour seeks to clear a path to building 1.5 million homes in five years.
The Deputy Prime Minister and Housing Secretary said that “delivering social and affordable houses at scale” is her “number one priority”.
But the planning system should be “a launchpad” rather than a “millstone” dragging down the housing market, she wrote in The Observer.
The overhaul, to be announced before MPs leave for summer recess, will include bringing back mandatory housing targets that were scrapped by the previous Government and introducing “golden rules” to ensure development works for local people and protects nature, Ms Rayner said.
“We plan to set out in detail more of these early and important changes in an updated National Planning Policy Framework next week,” Ms Rayner wrote.
Priti Patel makes bid to become next Conservative Party leader
07:30
Tom Watling
Dame Priti Patel has said she will stand to be Tory party leader, making her the fifth Conservative MP to throw her hat in the ring.
She joins Mel Stride, Tom Tugendhat, James Cleverly and Robert Jenrick in the race to replace Rishi Sunak as Tory leader.
She wrote on Twitter: “I am standing to be the new Leader of the Conservative Party. We must unite to win!
“I can lead us in opposition and unite our party and get us match fit for the next election, with unity, experience and strength.”
She said she could deliver the “experienced and strong” leadership needed to unite the Tories’ disparate factions, in an article for The Telegraph on Saturday.
Rachel Reeves to unveil ‘broke Britain’ dossier as Jeremy Hunt hits back with tax ‘scam’ claim
07:00
Tom Watling
