Rachel Reeves will announce ‘very tough decisions’ to address a public spending black hole of around £20 billion – but no tax rises should be expected, a senior minister has said.

Cabinet Office minister Pat McFadden said Labour’s election promise not to raise income tax, national insurance or VAT would ‘still hold’ ahead of the UK chancellor’s statement on Monday afternoon.

Reeves will lay out the spending inheritance left by the previous government – and announce the date of her first autumn Budget – as she pledges to ‘restore economic stability’.

In the House of Commons, she will say that a Treasury spending audit she commissioned shows that the previous government overspent this year’s budgets by billions of pounds after making a series of unfunded promises.

She will also accuse the previous Conservative administration of ‘covering up the true state of the public finances’, while cuts and delays to major infrastructure projects are expected.

The Conservatives have sought to suggest Labour is attempting to build a narrative which could lay the ground for future tax rises at its first budget.

‘Today is not a budget, people shouldn’t expect tax announcements today,’ McFadden told Times Radio.

‘We said a number of things about tax during the election, we said that we wouldn’t increase income tax rates, national insurance rates, or VAT. Those things still hold.’

Ministers have in recent days sought to suggest the economic inheritance is worse than they expected, even though the Institute for Fiscal Studies (IFS) think tank issued a stark warning about the state of the public finances ahead of the general election.

McFadden suggested Labour had discovered new information since winning the poll, adding: ‘Today what you will hear is how we are going to respond to that opening of the books.’

McFadden later 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.’

He gave the example of the Rwanda scheme, previously estimated to cost £400 million.

‘We have now found that it is £700 million, with billions more to be spent in future,’ McFadden said of the now-cancelled scheme.

He also suggested the IFS and other analysts would ‘have to today like everybody else acknowledge that the budgetary pressures this year are higher than those set out in the OBR forecast before the March budget’.

Paul Johnson, the director of the IFS, told the BBC that the £20 billion public spending hole the government is attempting to plug is roughly equivalent in scale to the cost of the Tories’ pre-election national insurance cuts.

‘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,’ he added.

Shadow transport secretary Helen Whately challenged Labour’s assertions that it would reveal new information about the public purse, as Reeves ‘would have known about the state of the public finances’ while serving in opposition because of the Office for Budget Responsibility.

Whately added: ‘Actually while Labour is going out there and trying to tell everybody that it is all so difficult for them, this is just them setting a narrative for tax rises that they want to bring in later on.’

By David Lynch, PA Political Correspondent

Press Association: News

source: PA

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