Chancellor Rachel Reeves has announced sweeping budget cuts and reforms, including the controversial scrapping of winter fuel payments for millions of pensioners, to address the Conservatives’ massive £22 billion deficit. Here’s the full story.
Fiery Speech in Parliament
In a fiery speech to Parliament, in her first major announcement since Labour won the recent election in a landslide, Chancellor Rachel Reeves laid out the sweeping changes she would need to make to fix the ruinous economic situation she claimed the outgoing Conservative government had left for her.
Calling Out Conservatives
Reeves accused the Conservatives of making “commitment after commitment without knowing where the money was going to come from.” She added, “Today, I am calling out the Conservatives’ cover-up, and I am taking the first steps to clean up what they have left behind.”
Controversial Winter Fuel Cut
The Chancellor announced her controversial decision to remove winter fuel payments for millions of pensioners to claw back some of the previous government’s overspending. Previously, the winter fuel payments, ranging from £100 to £300, benefited approximately 10 million pensioners. In contrast, under the new plan, only those receiving pension credit or other means-tested benefits will continue to receive this support.
Difficult Decisions
Reeves repeatedly explained her reasoning for what she called the “difficult decisions” she had to make, stating, “If we cannot afford it, we cannot do it.”
Financial Burden on Elderly
This decision is expected to save substantial government funds, although it has faced criticism for potentially increasing the financial burden on elderly citizens who do not qualify for pension credit.
Public Sector Pay Rises
Despite the cuts, Reeves confirmed that public sector pay recommendations would be entirely accepted. NHS workers and teachers will see a 5.5% pay rise, the armed forces 6%, the prison service 5%, and the police 4.75%. Junior doctors, who had repeatedly taken industrial action over poor pay, have been offered a 22% pay rise over two years.
Blaming Conservatives
However, even the pay increases were blamed on the Conservatives. Reeves claimed that the previous Conservative government had only budgeted for NHS workers and teachers to receive a 2% pay cut while the actual recommended figure was almost three times as much.
High-Profile Projects Cancelled
Several high-profile infrastructure projects have been cancelled as part of the cost-cutting measures. These include the Stonehenge road tunnel, the A27 Arundel bypass, and former Prime Minister Boris Johnson’s plan to build 40 new hospitals in England by 2030, only 1 of which has been completed.
Justifying Cancellations
Reeves justified these cancellations by citing the unsustainable nature of the planned expenditures. “These are not decisions I wanted to make,” she said, “but necessary and urgent decisions to stabilize our economic situation.”
Terminating Conservative Policies
In addition to the above cuts, Reeves announced the termination of several other policies initiated by the previous Conservative government. These include the sale of publicly owned NatWest shares, the cancellation of the much-delayed cap on social care costs, the illegal Rwanda deportation scheme for migrants, and the introduction of the Advanced British Standard qualification to replace A-Levels and T-Levels.
£22 Billion Deficit
Reeves revealed that the pay awards and recalculated departmental spending resulted in a £22 billion hole in public finances, necessitating immediate spending reductions. Departments have been asked to find savings totalling £3 billion, with further cuts anticipated in the upcoming budget.
Economists Support Claims
Several economists, including those from the Office for Budget Responsibility (OBR) and the Institute for Fiscal Studies (IFS), have supported Reeves’ claims regarding the Conservatives’ undisclosed overspending.
Shadow Chancellor Criticizes
However, unsurprisingly, Shadow Chancellor Jeremy Hunt lambasted Reeves’s claims, calling them “spurious” and insinuating that the Chancellor was preparing the electorate for tax rises to come.
Preparing for Tax Rises
Hunt stated, “Today, she will fool absolutely no one with a shameless attempt to lay the grounds for tax rises she didn’t have the courage to tell us about.”
No Tax Raises
Despite Hunt’s condemnation, Reeves reiterated that the newly elected Labour government would keep their election promise not to raise taxes on “working people.”
Upcoming Budget
Reeves announced that the next budget would be presented on October 30 and that public sector spending reviews will now take place every two years to ensure more stringent financial oversight.
Investigating Pandemic Contracts
The Chancellor also unveiled plans to investigate potential corruption in contracts signed during the pandemic, seeking to recover £2.6 billion. Several new measures will be introduced, including forcing private schools to add VAT to their fees and a windfall tax on oil and gas companies, which the government hopes will raise £14 billion over the next five years.
Unforgivable Inheritance
Reeves finished her speech with a coup de grace, aimed at burying the Conservative Party’s economic credibility for years to come: “The inheritance from the previous government is unforgivable.”
Spending With No Tomorrow
With a final flourish, nearly shouting over the supportive cheers from the over 400 Labour MPs behind her, she added, “They spent like there was no tomorrow, because they knew that someone else would pick up the bill and then in the election – and perhaps this is the most shocking part – they campaigned on a platform to do it all over again.”
Convincing Voters?
It remains to be seen whether her impassioned speech will convince voters that Labour’s economic inheritance is genuinely as bad as they claim and, if so, whether their newly announced measures will be justifiable to the public.
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Featured Image Credit: Shutterstock / Rupert Rivett.