Labour will make ‘tough choices’ on public finances, Streeting says

The Labour Government will not “duck difficult decisions” in its budget, Wes Streeting said amid concerns over a black hole in the public finances of around £20 billion.

The Health Secretary said “tough choices” were required ahead of an expected update from Chancellor Rachel Reeves on a spending audit she ordered Treasury officials to produce.

Her update will reveal “the true scale of the damage the Conservatives have done to the public finances”, a Labour source said.

They did not deny reports that an early assessment has found a nearly £20 billion annual gap between revenues and funding commitments, including in areas such as asylum and public sector pay.

Shocking

Speaking to broadcasters on Friday morning, Mr Streeting said Labour had discovered the state of the public finances was “shocking” since entering Government.

“We knew that the economic inheritance would be the worst since the Second World War. That’s why ahead of the General Election we were so disciplined about our manifesto to make sure the promises we made would be promises we would keep and the country could afford,” he told Times Radio.

“What I think we have found shocking is the state of the public finances in the year that we’ve inherited and that means tough choices … as the Chancellor, (Rachel Reeves) will continue to show iron discipline and she will have the full support of the entire Cabinet.

“Because these aren’t just tough choices for the Chancellor, these are tough choices for all of us and we’re determined to meet that challenge, to be honest with people, to not duck the difficult decisions and to make sure that we make the right choices now that set Britain up for the longer-term success that we need.”

The £20 billion figure could still shift as each department’s spending commitments are assessed before Ms Reeves’ Commons statement.

Tax hikes

Any tax hikes to plug the shortfall in spending for essential public services are not expected before the autumn budget, the date of which Ms Reeves is also set to announce on Monday.

Labour has ruled out lifting income tax, VAT, national insurance and corporation tax, but changes to capital gains or inheritance levies may be on the table.

Asked about the black hole at a meeting of G20 finance ministers in Brazil, Ms Reeves said: “I’ll give a statement to Parliament on Monday, but I have always been honest about the scale of the challenge we face as an incoming Government, and let me be crystal clear: we will fix the mess we have inherited.”

The Labour source said: “On Monday, the British public are finally going to see the true scale of the damage the Conservatives have done to the public finances.

“They spent taxpayers’ money like no tomorrow because they knew someone else would have to pick up the bill.

“It now falls to Labour to fix the foundations of our economy and that work has already begun.”

As she presents the findings of the audit, Ms Reeves is expected to confirm the plans of her Tory predecessor Jeremy Hunt would require significant cuts to already cash-strapped public services.

The Chancellor is widely expected to be forced to raise taxes in the budget to avoid the spending squeeze implied by the existing plans and to meet her fiscal rule to have debt falling as a share of gross domestic product in five years’ time.

Ms Reeves will also respond to the public sector pay recommendations as the Government faces having to find money for above-inflation rises.

Reports have suggested teachers and NHS workers could be in line for a 5.5% pay boost, which could cost about £3.5 billion more than had been budgeted.