LONDON (AP) — Britain’s new Labour government axed several construction projects Monday in order to plug what it says is a newly found 22-billion-pound ($28 billion) shortfall in the public finances inherited from the previous Conservative administration.
In her first major speech as Treasury chief, Rachel Reeves accused the previous government of covering up the dire state of the nation’s finances following a review of departmental spending that she commissioned three weeks ago in the wake of Labour’s landslide victory. She also confirmed that the government had reached agreement with unions to bring an end to the long-running strike of doctors in England at the start of their careers.
“They ducked the difficult decisions, they put party before country and they continued to make unfunded commitment after unfunded commitment, knowing that the money was not there, resulting in the position that we have now inherited,” she said. “This level of overspend is not acceptable.”
Reeves charged the previous government with covering up the scale of its spending on asylum issues, including its controversial plan to send migrants on a one-way journey to Rwanda, and transport and hospital projects that it never planned to construct.
While not announcing any changes in taxes, Reeves did set out a series of what she termed “difficult” savings, including the establishment of a new office to identify “wasteful spending.” She also announced plans to stop nonessential spending on consultants and sell off surplus property. Some transport projects where funding has yet to be determined will also be axed, include scrapping a controversial tunnel near Stonehenge.
Reeves did not announce any changes in taxes but she put lawmakers on notice that there may be some increases when she delivers her first budget on Oct. 30.
The budget, she said, will involve “taking difficult decisions … across spending, welfare and tax.”
Labour pledged during the campaign that it wouldn’t raise taxes on “working people,” saying its policies would deliver faster economic growth and generate the additional revenue needed by the government. Though higher taxes on income and sales have been ruled out, Reeves could look to raise more revenue by other means, such as closing tax loopholes, particularly on capital gains or on inheritance.
Critics, especially her predecessor Jeremey Hunt, argue that Reeves is trying to score early political points in the new Parliament, and that she knew full well the state of the public finances during the general election.
“Today’s exercise is not economic, it’s political,” Hunt said in response to Reeves’ speech.
While the government is trying to keep a lid on some spending, it’s having to resolve a number of issues, which will inevitably require more money.
Reeves also said she would make sure that pay claims in the public sector are resolved swiftly, as she confirmed that the British Medical Association agreed to a 22% pay increase for junior doctors over two years.
“Today marks the start of a new relationship between the government and staff working in our National Health Service, and the whole country will welcome that,” Reeves said.
Junior doctors have taken industrial action 11 times in the past 20 months. Their last strike took place from June 27 to July 2, just days before the general election.
The state of the National Health Service was one of the main debating points in the election, with Labour saying it is “broken” as some 7.6 million people wait for care.
“An end to strikes is a crucial first step to getting the NHS back on track,” said Annie Williamson, a research fellow at the Institute For Public Policy Research and a practicing NHS doctor. “Yet the government must also address the root cause of why they’ve happened in the first place.”
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