UK
Budget ‘black hole’ is same size as Rishi Sunak’s pre-election tax cuts, says IFS chief
By Josh Self
Editor
Monday, 29 Jul, 2024
Editor
Monday, 29 Jul, 2024
The boss of a leading economic think tank has said that the “black hole” in the UK’s public finances is equivalent to the Conservative Party’s pre-election National Insurance cuts.
Former chancellor Jeremy Hunt cut National Insurance by 2p in the last spring Budget before the election, after making the exact same cut in the autumn statement last year.
The combined cuts were expected to save the average earner £900 a year.
At the time, Hunt argued that it would make the tax system fairer and help revive the economy.
In order to pay for the tax reductions, the former government insisted it was looking at further public spending cuts, to be introduced if the Conservatives had won the recent election.
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Paul Johnson, director of the Institute for Fiscal Studies, said on Monday that it was “striking” that £20 billion “black hole” is of the same scale as Hunt’s NI cuts.
Johnson told BBC Breakfast: “It is very striking that if this problem is about £20 billion big that is exactly the scale of the National Insurance cuts implemented by Jeremy Hunt just before the election.
“Now, if those cuts were implemented in the knowledge that there was this kind of hole that is not good policy to put it mildly.”
The comments precede a commons statement from Rachel Reeves on Monday, which is expected to lay the ground for cuts to public spending, tax rises and delays to some infrastructure projects in order to fill the £20 billion “hole” in the nation’s finances.
Reeves will also announce an “office of value for money”, a body that will use civil service resources to identify and recommend savings for the current financial year.
Labour’s manifesto committed not to raise taxes on working people, relying instead on economic growth to improve government funds.
Labour has ruled out increases in income tax, VAT, national insurance and corporation tax, leaving changes to capital gains tax, inheritance tax and pensions relief on the table.
Speaking on Monday, Reeves will accuse the previous Conservative government of having “covered up” the state of public finances.
The chancellor will also reveal the date of this year’s budget, amid speculation Labour is considering raising taxes in that fiscal event.
Reeves is expected to say: “It is time to level with the public and tell them the truth.
“The previous government refused to take the difficult decisions. They covered up the true state of the public finances. And then they ran away. I will never do that.
“The British people voted for change and we will deliver that change. I will restore economic stability. I will never stand by and let this happen again.”
Responding, shadow exchequer secretary to the Treasury Gareth Davies accused Labour of “trying to con the British public into accepting … tax rises”.
Josh Self is Editor of Politics.co.uk, follow him on X/Twitter here
Former chancellor Jeremy Hunt cut National Insurance by 2p in the last spring Budget before the election, after making the exact same cut in the autumn statement last year.
The combined cuts were expected to save the average earner £900 a year.
At the time, Hunt argued that it would make the tax system fairer and help revive the economy.
In order to pay for the tax reductions, the former government insisted it was looking at further public spending cuts, to be introduced if the Conservatives had won the recent election.
***Politics.co.uk is the UK’s leading digital-only political website. Subscribe to our daily newsletter for all the latest election news and analysis.***
Paul Johnson, director of the Institute for Fiscal Studies, said on Monday that it was “striking” that £20 billion “black hole” is of the same scale as Hunt’s NI cuts.
Johnson told BBC Breakfast: “It is very striking that if this problem is about £20 billion big that is exactly the scale of the National Insurance cuts implemented by Jeremy Hunt just before the election.
“Now, if those cuts were implemented in the knowledge that there was this kind of hole that is not good policy to put it mildly.”
The comments precede a commons statement from Rachel Reeves on Monday, which is expected to lay the ground for cuts to public spending, tax rises and delays to some infrastructure projects in order to fill the £20 billion “hole” in the nation’s finances.
Reeves will also announce an “office of value for money”, a body that will use civil service resources to identify and recommend savings for the current financial year.
Labour’s manifesto committed not to raise taxes on working people, relying instead on economic growth to improve government funds.
Labour has ruled out increases in income tax, VAT, national insurance and corporation tax, leaving changes to capital gains tax, inheritance tax and pensions relief on the table.
Speaking on Monday, Reeves will accuse the previous Conservative government of having “covered up” the state of public finances.
The chancellor will also reveal the date of this year’s budget, amid speculation Labour is considering raising taxes in that fiscal event.
Reeves is expected to say: “It is time to level with the public and tell them the truth.
“The previous government refused to take the difficult decisions. They covered up the true state of the public finances. And then they ran away. I will never do that.
“The British people voted for change and we will deliver that change. I will restore economic stability. I will never stand by and let this happen again.”
Responding, shadow exchequer secretary to the Treasury Gareth Davies accused Labour of “trying to con the British public into accepting … tax rises”.
Josh Self is Editor of Politics.co.uk, follow him on X/Twitter here
Finance minister to reveal fiscal audit of 'broke and broken' Britain
Agence France-Presse
July 28, 2024
London (AFP) – Finance minister Rachel Reeves will on Monday claim Britain is "broke and broken" when she reveals the findings of an assessment into the country's public finances ahead of a forthcoming budget. Reeves, appointed to the role following the centre-left Labour party's landslide election victory on July 4, will tell MPs the previous Conservative government "overspent this year's budgets by billions of pounds".
She will say this occurred through "a series of unfunded promises" and that the Tories then "covered up the true state of the public finances," according to the finance ministry.
It added Reeves, the first female chancellor of the exchequer, will vow to "restore economic stability" and "fix the foundations of our economy" in the afternoon statement to the House of Commons, expected after 3:30pm (1430 GMT).
Her plan will include government departments delivering "savings this financial year".
Reeves's first steps will also include commissioning an independent forecast by the national fiscal watchdog, the Office for Budget Responsibility, and confirming the dates for the next budget and spending review later this year.
She is set to commit the government to one major fiscal event per year, ending so-called surprise budgets which the ministry said have "caused uncertainty for both the markets and family finances".
Meanwhile a new Office of Value for Money will be established to curb wasteful government spending and provide further scrutiny, "so that value for money governs every decision government makes," the ministry said.
"Across the public sector, the new government's assessment has shown that Britain is broke and broken," Prime Minister Keir Starmer's Downing Street office said in a weekend statement previewing Reeves's speech.
Black hole?
The Conservatives have refuted Labour's claims, alleging the new government is using the fiscal assessment to lay the ground for tax hikes.
The audit is widely seen as preceding infrastructure spending cuts and potential rises to some taxes -- although Labour vowed during the election campaign that it would not raise the main rates levied on workers.
The Sunday Times and other media have reported that Reeves's team has identified an additional public finances black hole of around £20 billion ($26 billion).
As a result, she plans to delay or scrap a number of unfunded rail and road projects, according to the reports.
The UK deficit -- the difference between what the government receives in tax and what it spends -- stood at around £120 billion in the 12 months to the end of March, the country's last fiscal year.
Labour has vowed to improve the performance of public services, notably the National Health Service and schools, which will require heavy spending, according to economists.
The party, which has spent the past 14 years in opposition, has pledged to boost public sector funding primarily through ramped up economic growth -- vowing to achieve the highest annual increases to GDP in the G7.
Reeves has already unveiled plans for the mass building of homes in a bid to help drive that growth, alongside reform of the country's antiquated planning system, renewed focus on the green energy transition and other measures.
Labour has ruled out immediate rises to income, worker insurance and corporation taxes. But changes to levies on capital gains and inheritance appear possible to fill holes in the public finances
Agence France-Presse
July 28, 2024
London (AFP) – Finance minister Rachel Reeves will on Monday claim Britain is "broke and broken" when she reveals the findings of an assessment into the country's public finances ahead of a forthcoming budget. Reeves, appointed to the role following the centre-left Labour party's landslide election victory on July 4, will tell MPs the previous Conservative government "overspent this year's budgets by billions of pounds".
She will say this occurred through "a series of unfunded promises" and that the Tories then "covered up the true state of the public finances," according to the finance ministry.
It added Reeves, the first female chancellor of the exchequer, will vow to "restore economic stability" and "fix the foundations of our economy" in the afternoon statement to the House of Commons, expected after 3:30pm (1430 GMT).
Her plan will include government departments delivering "savings this financial year".
Reeves's first steps will also include commissioning an independent forecast by the national fiscal watchdog, the Office for Budget Responsibility, and confirming the dates for the next budget and spending review later this year.
She is set to commit the government to one major fiscal event per year, ending so-called surprise budgets which the ministry said have "caused uncertainty for both the markets and family finances".
Meanwhile a new Office of Value for Money will be established to curb wasteful government spending and provide further scrutiny, "so that value for money governs every decision government makes," the ministry said.
"Across the public sector, the new government's assessment has shown that Britain is broke and broken," Prime Minister Keir Starmer's Downing Street office said in a weekend statement previewing Reeves's speech.
Black hole?
The Conservatives have refuted Labour's claims, alleging the new government is using the fiscal assessment to lay the ground for tax hikes.
The audit is widely seen as preceding infrastructure spending cuts and potential rises to some taxes -- although Labour vowed during the election campaign that it would not raise the main rates levied on workers.
The Sunday Times and other media have reported that Reeves's team has identified an additional public finances black hole of around £20 billion ($26 billion).
As a result, she plans to delay or scrap a number of unfunded rail and road projects, according to the reports.
The UK deficit -- the difference between what the government receives in tax and what it spends -- stood at around £120 billion in the 12 months to the end of March, the country's last fiscal year.
Labour has vowed to improve the performance of public services, notably the National Health Service and schools, which will require heavy spending, according to economists.
The party, which has spent the past 14 years in opposition, has pledged to boost public sector funding primarily through ramped up economic growth -- vowing to achieve the highest annual increases to GDP in the G7.
Reeves has already unveiled plans for the mass building of homes in a bid to help drive that growth, alongside reform of the country's antiquated planning system, renewed focus on the green energy transition and other measures.
Labour has ruled out immediate rises to income, worker insurance and corporation taxes. But changes to levies on capital gains and inheritance appear possible to fill holes in the public finances
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