£22bn ‘hole’ In the budget, he complained that the Conservative government, led by British Chancellor of the Exchequer Rachel Reeves, had left. However, he assured that there would be no increase in income tax or VAT to cover the gap.
“We inherited an excess of spending of £22 billion”, or around €26 billion, which was “hidden” by the conservative partysaid the minister in her speech to the House of Commons, arguing that This is the largest deficit since World War II. According to Reeves, this “hole” could lead to a 25% jump in the budget deficit this year if no action is taken. To achieve this, it is necessary to “work urgently and urgently to reduce the pressure on the public finances by £5.5 billion this year and by more than £8 billion next year”, he added.
“Risk to financial stability”
“This level of cost overruns is not sustainable. If left unchecked, it poses a risk to economic stability. Therefore, it is now up to us to make difficult decisions,” Reeves said, announcing that on October 30th will present a first budget. But he promised that the government, sticking to the Labour Party’s pre-election programme, would not increase social security contributions and taxes “for workers”.
The measures the government is considering
According to the Sunday Times, the government is considering canceling or postponing some infrastructure projectssuch as the HS2 high-speed rail line that would terminate at Euston station in central London, choosing another station on the outskirts of the capital as its terminus.
Reeves said today that the government will review the hospital construction program, stressing that it should be realistic and fully costed. Last year, the National Audit Office (NAO) announced that only 32 of the 40 hospitals that former Prime Minister Boris Johnson promised to build would be completed on schedule by 2030. The scheme was a campaign promise by Johnson in 2019. However, his pledge to build 40 new hospitals in England by 2030 was criticised because some of the proposals involved only renovating existing buildings.
“No” to austerity
Labour rules out any austerity proposals, however and the government will follow the recommendations of independent experts on collects for thousands of public employeesabove inflation limits. Reeves said public sector workers such as teachers and doctors would receive £9.4bn in pay rises, while cuts would be made in other sectors.
Strikes by doctors, nurses, teachers and civil servants over pay issues have put public services such as the National Health Service under pressure over the past two years. The Trades Union Congress warned of further strikes after the election if Keir Starmer’s government did not deliver pay rises.
Around 1.3 million workers in the National Health System and 500,000 teachers will receive a 5.5% increase. In the Armed Forces, the increases will reach 6%.
Where will the cuts be made?
Instead, under the cuts announced by Mr Reeves, millions of pensioners will lose their annual heating allowance of up to £600. Only low-income pensioners who already receive other pension benefits will continue to receive the benefit. This will save £1.5bn a year. Until now, all pensioners, around 11.5m people, received the heating allowance.
In education, the Ministry of Finance plans to impose a 20% VAT on tuition fees paid by parents at private schools from 1 January.
Reeves stressed he intended to keep the party’s election pledge not to raise income tax or VAT. Any further tax changes will be announced in October’s budget, which Reeves said would include a new set of non-negotiable tax rules.
Sources: AMPE, Reuters, AFP