Rachel Reeves to declare cuts to plug £20bn hole in finances

This is expected to include the cancellation of some road and rail projects and a reduction in spending on external consultants.

However, Ms Reeves will not suggest that tax rises will be required at this stage.

A Treasury internal audit of the public finances will be published on Monday (July 29), and is expected to show a gap of around £20bn between tax revenues coming in and expected spending, BBC News reports.

The Conservatives left us with the worst inheritance since the Second World War.

Today I will set out how this new Labour government will fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.

— Rachel Reeves (@RachelReevesMP) July 29, 2024

The chancellor will tell Parliament that this requires “immediate action” to restore economic stability and “fix the foundations of our economy”.

Projects that could be paused or cancelled include the road tunnel under Stonehenge, Boris Johnson’s New Hospital programme and the Euston section of HS2.

What action will Rachel Reeves suggest?

Ms Reeves will invite the Office for Budget Responsibility to make an assessment of the public finances.

This will also kick off the process of a Spending Review, which looks at departmental budgets over the longer term.

Additionally, budgets or similar fiscal events will be held only once a year, with the Chancellor expected to set a date for her first in the autumn.

Ms Reeves is also expected to announce that some public sector workers will be given pay rises in line with the recommendations of the independent pay review bodies.

This would mean above-inflation settlements for teachers, members of the armed forces and prison staff, among others.

The chancellor is said to believe that the cost of funding the deals should be weighed against the cost of the disruption to the economy from strikes and the cost of failing to recruit and retain staff.

In response to this, the Conservative Party said the state of the public finances was clear before the election.

Former Tory chancellor Jeremy Hunt accused the new government of "peddling nonsense".

The books were "wide open and what they show is a healthy, growing economy”, he said.

Recommended reading:

• NHS issues national alert over shortages of blood types urging people to donate
• Treasury gives verdict on whether 1p and 2p coins will go out of circulation
• Royal income to rise by £45m and they're getting 2 new helicopters

Meanwhile, SNP Westminster leader Stephen Flynn urged Ms Reeves not to “pull a George Osborne and starve our public services of much-needed cash” ahead of her announcement.

He said: “People in Scotland voted for change – but the Labour government is paving the way to cut and restrict funding to our NHS, public services and vital infrastructure.

“After 14 years of Westminster austerity, our public services cannot take any more. They need an urgent cash boost now – not squeezed budgets and excuses from the Chancellor. You can’t cut your way to better services – and hospitals and schools won’t build themselves.”