Reeves paves way for cuts and tax rises to fix finances

Rachel Reeves will lay the ground for cuts to public spending, tax rises and delays to some major infrastructure projects as she sets out the dire situation the Labour government has inherited from the Tories.

- Aletha Adu

Publishing a Treasury audit today, the chancellor will tell parliament the last government refused to take difficult decisions and “covered up”’ the true state of the public finances.

She is expected to pause work on a string of infrastructure projects, including Boris Johnson’s flagship plan to build 40 new hospitals and the proposed two-mile tunnel under Stone henge.

Reeves will unveil a new Office of Value for Money , an arm’s-length body that will use existing civil service resources to immediately start identifying and recommending savings for the current financial year.

She will say surplus publicly owned property will be sold and immediate action will be taken to stop “non-essential” spending on consultants.

A Treasury source said today’s announcement was not about “a return to austerity”, but about repairing the damage of “ 14 years of unfunded promises” which had left a £20bn hole in government spending for essential public services.

The Guardian reported on Friday that Reeves is likely to approve above-inflation pay rises for millions of public sector workers, with teachers and NHS staff in line for a 5.5% pay rise costing about £3.5bn more than had been budgeted for. These are seen as necessary to avoid the costs to the economy of the waves of strike action seen under the last government.