Good morning. After three weeks as chancellor, Rachel Reeves will today present the most significant policy announcement of the new Labour government so far. Think of it as an inverse budget. Budgets are all about how the government intends to spend money. According to the extensive briefing about this statement, instead it will mostly focus on what the government won’t be spending, on projects it is cancelling because supposedly the last administration kept them on the books without having the cash to fund or finish them.
In policy terms, it will tell us more about what the government wants to prioritise. (Reeves will include recommendations from public sector pay review bodies in her list of Tory “spending black hole” measures. She is expected to accept the recommendations for above-inflation pay increases which the Tories had not approved.)
In political terms, this is an announcement intended to reinforce a narrative Labour wants the public to remember for a decade or more – that the Tories left Britain “broke and broken”.
And, in economic terms, today’s statement is widely expected to pave the way for significant tax rises in the autumn. During the election campaign Labour said it did not want to raise taxes for “working people”. But this implied that tax increases that would only affect the wealthy were in scope and the Treasury has not denied suggestions that today’s analysis could be used to justify measures like capital gains or inheritance tax rises in the budget in the autumn.
Here is Aletha Adu and Peter Walker’s preview story.
In an article for the Daily Express, Jeremy Hunt, the Tory former chancellor, has accused Reeves of being “beyond disingenuous” and of peddling “mistruths”. He argues that she cannot say that she was misled about the state of the public finances because the Office for Budget Responsibility publishes its own assessment twice a year.
Hunt also implies Labour have betrayed voters over tax (ignoring the fact that, during the election, CCHQ regularly attacked Labour for not give cast-iron commitments not to raise taxes like capital gains tax and inheritance tax).
But in interviews this morning Pat McFadden, the Cabinet Office minister, said that, since taking office, ministers had discovered new information about the government’s spending liabilities that was not publicly known before the election. He told Sky News:
What we have discovered since taking office a few weeks ago is things were even worse than we thought and the previous government was certainly guilty of running away from the situation. Let me give you a couple of examples.
We were told, for example, that the Rwanda scheme was going to cost £400m. We have now found that it is £700m, with billions more to be spent in future.
The government were emptying the country’s reserves to pay for other parts of their asylum policy.
In addition to that, the secretary of state for education had a pay offer for teachers on her desk that nobody told anyone about during the election.
When you take up all of this, and you add it all up, it adds to significant pressures on the budget this year which we have to react to.
And, in an interview with the Today programme, McFadden accused Hunt himself of not telling the truth about tax policy during the election. McFadden said:
One of the very revealing things that has happened since the election is that the now shadow chancellor, Jeremy Hunt, has admitted to his shadow cabinet that that £17bn pounds of unfunded tax cut promises at the heart of the Tory manifesto could not have been implemented this year. That is not what they were seeing during the election. It is a profoundly revealing admission. And it shows that they knew more about the public spending situation during the election than they were telling the election.
Here is the agenda for the day.
11am: The high court is due to give its judgment on a claim that the government’s emergency ban on puberty blockers is unlawful.
11.30am: Downing Street holds a lobby briefing.
2.30pm: Yvette Cooper, the home secretary, takes questions in the Commons.
2.30pm: Nominations officially close for the Conservative party leadership contest. Six candidates have already said they are standing – Tom Tugendhat, James Cleverly, Mel Stride, Priti Patel, Robert Jenrick and Kemi Badenoch – and no one else is expected to run.
After 3.30pm: Rachel Reeves, the chancellor, makes a statement to MPs on the Treasury’s “audit of the spending inheritance left by the previous administration”.
Late afternoon: Reeves holds a press conference.
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