Rachel Reeves has announced significant cuts, including the elimination of the social care cap and a reduction in winter fuel payments, in an effort to address a £22bn shortfall in public spending that she claims was concealed by the previous Conservative government.
In a Commons statement blending economic detail and partisan critique, the chancellor emphasized fiscal responsibility with the refrain: “If we cannot afford it, we cannot do it.”
Reeves announced the autumn budget date of 30 October, signaling upcoming tax increases and stringent fiscal decisions across spending, welfare, and tax.
Key Measures Announced:
- Social Care Cap Scrapped: The plan to cap care charges for the elderly has been eliminated, saving £1bn annually. Reeves acknowledged the anger this decision would provoke, stating it was a necessary measure given the inherited fiscal challenges.
- Winter Fuel Payments Limited: Previously universal winter fuel payments for pensioners will now be restricted to those on lower incomes who receive pension credit.
- Hospital and Road Projects Reviewed: The plan for 40 new hospitals will undergo a review, resulting in a “thorough, realistic and costed timetable for delivery.” Additionally, certain transport projects, including a tunnel for the A303 under Stonehenge and a project on the A27, will be scrapped.
Fiscal Mismanagement Accusations
Reeves accused the previous Conservative government of covering up fiscal mismanagement, revealing a £22bn gap in the public finances for this year. She cited overspending in several areas, including a £6.4bn overspend on asylum and £1.6bn on rail, alongside higher-than-anticipated inflation and public sector pay awards.
In a letter following the statement, the head of the Office for Budget Responsibility (OBR) announced a review to assess the adequacy of the information provided by the previous Treasury.
Political Reactions
Shadow Chancellor Jeremy Hunt accused Reeves of manufacturing the fiscal crisis to justify planned tax rises and project cancellations. However, Paul Johnson, director of the Institute for Fiscal Studies (IFS), partially supported Reeves’ claims, acknowledging the poor state of public finances left by the previous government.
Further Cuts and Savings
Government departments are expected to find £3bn in savings, targeting consultants, communications, and back-office staff. Other measures include scrapping the Advanced British Standard qualification, improving the processing of asylum claims, and retaining the government’s shares in Natwest.
Reeves concluded that while tough decisions are being made, these steps are essential to restore fiscal stability and address the uncovered financial mismanagement.