Reeves to Cut Projects for Budget Shortfall
Chancellor Rachel Reeves will announce cuts worth billions to fix a financial gap when she speaks to Parliament on Monday. These cuts may include canceling some road and rail projects, reducing spending on consultants, and cutting public sector waste. Reeves will blame the previous government for hiding budget problems.
Projects that might be stopped include the Stonehenge road tunnel and the New Hospital programme. Labour won’t borrow money for daily costs but might for investments like HS2. Both Labour and the Conservatives promised no new taxes during the election, but experts doubted this was possible without cuts or tax increases.
Economists warned before the election that the new government would have to raise taxes, cut spending, or drop debt reduction plans. The new government says the financial situation is worse than expected. Reeves is shocked by some findings but won’t suggest tax hikes yet. She will ask the Office for Budget Responsibility to review the finances and start a Spending Review.
Budgets will be set annually, with the first one in the autumn. Insiders say Reeves’ focus on spending cuts avoids immediate tax increases. Pat McFadden, a government official, said the financial situation was tougher than expected due to undisclosed issues. Economist Michael Saunders predicts a tough spending squeeze and possible tax rises.
Reeves is expected to approve pay rises for some public sector workers, such as teachers and armed forces, based on independent reviews. This balances the cost against economic disruption from strikes. She will also announce a new “Office of Value for Money” to find and recommend savings.
The Home Secretary revealed that the Rwanda asylum plan cost taxpayers £700m, and other departments found unmet spending needs. Environment Secretary Steve Reed noted that flood defense conditions were worse than expected. The Conservatives argue that public finances were clear before the election, with Jeremy Hunt calling Labour’s claims nonsense and Helen Whately accusing Labour of setting a narrative to justify tax increases.
Re-reported from the article originally published in BBC.
