Government lays the ground for massive tax hikes and further cuts in October, but the Tories cry foul

Chancellor Rachel Reeves yesterday delivered a doom-laden statement in the House of Commons. The Labour politician claimed that the state of the public finances were far worse than expected, stating that the previous government had left a £22 billion black hole.

She went on to list a number of cost pressures, including funding public sector pay rises, valued at around £9 billion, while taking the axe to a number of the previous governments flagship policy’s, which she felt were either unfunded or did not represent value for money. In the statement Miss Reeves announced the scrapping of Boris Johnson’s plan to build 40 new hospitals by 2030, scrapped three major infrastructure schemes namely the A303 Stonehenge tunnel, the A27 Arundel bypass and the Restoring our Railways scheme, cut winter fuel payments from pensioners not in receipt of benefits and scrapped the social care cap.

Ominously, she went on to warn those listening to the statement that, “I have to tell the house that the budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax”, while Whitehall has been told to find over £3 billion in savings.

Ms Reeves’ dire statement follows work she claims was under taken immediately after Labour took office, with accusations that the previous Conservative Government had concealed some spending pressures or simply not accounted for with official estimates.

This claim, however drew a sharp response from her Conservative predecessor, Jeremy Hunt, who told claimed that the statement revealed Labour was plan huge tax rises, accusing the new chancellor of the “biggest betrayal in history”.

He went on to say that the claims by Labour were “utterly bogus” and an “attempt to hoodwink the public”.

“In her first big moment, she breaks that trust with an utterly bogus attempt to hoodwink the public about the choices she has,” he said.

“Over 50 times in the election, they told us they had no plans to raise taxes. Now in a U-turn that will forever shame this Labour government, she is laying the ground to break her word, and when she does, her first Budget will become the biggest betrayal in history by a new chancellor, and working families will never forgive her.”

Mr Hunt added: “She caved into the unions on pay, left welfare reform out of the King’s Speech, soft pedalled on our productivity programme, and that is a choice, not a necessity.

“That choice means that taxes will have to go up, and she chose not to tell us before the election.”

And in a sign of things to come Mr Hunt has written to the Cabinet Secretary, Simon Case, saying Ms Reeve’s claim contradict public spending estimates presented to Parliament by her and other Treasury ministers on July 17 which did not include the “supposed multi billion pound black hole”.

He told the Telegraph that: “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.

“There is a clear issue here: either the spending plans in estimates signed off by senior civil servants and presented to Parliament are incorrect, or the document the Chancellor has produced to the House today is incorrect.”

The Conservative have also been swift to point out that the state of the public finances was widely known before the General Election, thanks to the independent OBR established by a previous Conservative chancellor and detailed analysis by the IFS and other influential think tanks.

Indeed, prior to the election IFS director Paul Johnson warned that spending on many public services would likely need to be cut over the next parliament unless government debt was to rise, or taxes increased.

Telling Sky News: “Add in low growth and the after-effects of the pandemic and energy price crisis and you have a toxic mix indeed when it comes to the public finances”. He went on to accuse both the main parties, Labour for their denial of plans to raise taxes and the Conservatives for a fanciful tax cutting manifesto as ignoring the “raw facts” and failing “to face up to the real challenges”.

With both Labour and the Conservative locked into a battle over who’s to blame, launching volleys of claim and counter claim, party strategist will be focused on one question – who will the public believe? Will it be Labour, still riding high in the opinion polls and enjoying an extended honeymoon period, or a battered and leaderless Conservative Party desperately trying to find relevance saying “we told you so, Labour were always planning to raise your taxes.