Key events
Q: Before the election, Labour politicians were asked over and over again about comments from groups like the Institute for Fiscal Studies saying there was a black hole in the public finances. But you refused to accept that.
Reeves says the IFS said yesterday the situation was worse than they thought.
Q: But you used to say you would grow your way out of these problems?
Reeves says she remains committed to growth. She says she has announced moves to promote growth. But she did not anticipate a £22bn black hole. And no one else anticipated that either – not the IFS or the OBR. Only the last government knew. And they covered it up, she says.
Husain moves on to adult social care, and she plays a clip from an interview the programme did with Andrew Dilnot earlier. Dilnot is the economist who wrote a report for the coalition government recommending having a cap on what people might have to pay for adult social care (a policy that was endlessly postponed by the Tories, and shelved by Reeves yesterday). Dilnot told Today Reeves’ decision was “a tragedy”.
Reeves says local authorities did not have the money to fund this scheme.
Q: But Labour’s manifesto talked about a national care service?
Reeves says there are lots of things Labour would like to do. But it needs to have the money available.
She says she found the reserves for this year had been spent three times over, just three months into the start of the financial year.
Q: Will you cap social care costs later in this parliament?
Reeves says Wes Streeting will be drawing up plans for social care.
She says the Liz Truss experience shows what happens when the government spends money it does not have.
Q: Do you accept that, having funded a 22% pay rise for junior doctors, other health workers will want the same?
Reeves says the pay review bodies recommended different settlements for different groups of workers.
She says she published analysis yesterday showing the health strikes cost £1.7bn.
That is a reference to this passage from the report published yesterday.
A total of £1.7bn of funding was provided to NHS England to mitigate against the direct cost of industrial action in 2023-24 and ease pressures on hospitals. This was provided through a combination of reprioritised Department of Health and Social Care funding and new funding from HM Treasury. This includes the cost to cover shifts and lost pay efficiencies, whilst subtracting salary savings across those staff on strike.
She says the government did not give the junior doctors all they wanted. They wanted 35%, she says.
Reeves defends above-inflation pay increaes for public sector workers, saying they’re in line with private sector pay deals
Mishal Husain is interview Rachel Reeves on the Today programme now.
Q: Do you accept that part of the £22bn black hole comes from decisions you made, on public sector pay?
Reeves says the last government set the remit for the public sector pay review bodies. It did not include guidance on what was affordable. She says it was right to accept the recommendations. It would have been almost unprecedented to ignore them, she says.
Q: So you would have set tighter guidelines for the public sector pay?
Reeves says it is right public sector workers are properly rewarded.
She says some of the money, just over a third, will be funded by efficiency savings.
Q: Are you saying you would rather have given them less?
Reeves says it is right public sector workers are properly rewarded. These pay increases are in line with what is happening in the private sector, she says.
Last night Jeremy Hunt, the shadow chancellor, wrote to Simon Case, the cabinet secretary, asking why Rachel Reeves had presented public spending figures to MPs that contradicted what the Treasury said in the estimates (public spending figures) it presented to parliament last week.
Hunt said:
After the statement made in the House of Commons today, I am writing to follow up with deep concern over some of the conflicting claims that have been made which risk bringing the civil service into disrepute.
It is deeply troubling that the chancellor has today chosen to make claims about the public finances to the House of Commons which directly contradict the documents and legislation the new government put before parliament, signed off by senior civil servant accounting officers.
The Treasury has rejected this claim (as explained on this blog late yesterday). In the document it published yesterday it said it used the pre-election figures in the estimates to allow a vote on them to take place before recess. The report explained:
The government laid main estimates for 2024-25 before parliament on 18 July, the earliest available opportunity after the general election and considerably later than the usual timetable. These estimates were prepared before the general election, and the government was forced to lay them unchanged in order to allow them to be voted on before the summer recess. This was necessary to avoid departments experiencing cash shortages over the summer. The pressures set out in this document represent a more realistic assessment of DEL spending. As usual, departmental spending limits will be finalised at supplementary estimates.
Good morning. Yesterday’s statement from Rachel Reeves on the “spending inheritance” was not a budget, but it had all the significance of what the Treasury call a “fiscal event” and, as happens after a budget, the chancellor and shadow chancellor are fighting it out on the airwaves on the next morning’s interview round.
Here is our overnight story about what Reeves announced, by Pippa Crerar, Larry Elliott and Peter Walker.
And here is Nimo Omer’s assessment in her First Edition newsletter.
In the Commons yesterday Reeves was constrained in what she could say about the inheritance left by the Tories by rules that prevent MPs from calling each other liars. Sky News does not have these restrictions, and in her interview on the channel this morning Reeves let rip, accusing her predecessor of deliberately misleading the public about the state of the public finances. She said:
Jeremy Hunt covered up from the House of Commons and from the country the true state of the public finances. He did that knowingly and deliberately.
He lied, and they lied during the election campaign about the state of the public finances …
It is beyond reckless and irresponsible, and at a time when trust in politics is already at an all-time low … to then mislead people in that way during a general election about what was possible – it was unforgivable.
I will post more from her interviews, and Hunt’s, shortly.
Here is the agenda for the day.
Morning: Keir Starmer chairs cabinet.
11.30am: David Lammy, the foreign secretary, takes questions in the Commons.
After 12.30pm: Angela Rayner, the deputy PM and housing secretary, gives a statement to MPs on changes to planning rules. Later she will do a planning-related visit in Hampshire.
Afternoon: MPs debate the budget responsibility bill at second reading.
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