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'More difficult decisions to come', Chancellor warns LBC after revealing cuts to plug £22 billion 'black hole'
30 July 2024, 08:29
The Chancellor has revealed there are "more difficult decisions to come" over spending cuts and tax rises in the Budget this autumn, as she warned of a "black hole" in the public finances.
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Rachel Reeves told LBC's Nick Ferrari at Breakfast said she was "not prepared to put our economic stability at risk", as she accused the previous Conservative government of mismanaging the public finances.
Ms Reeves said: "This is not about something happening in five years time, the £22 billion black hole that I set out yesterday is an in year gap this very year, and to not act on that gap would put at risk our economic stability and our financial stability as a country."
Among the cuts announced yesterday was the decision that pensioners who do not get pension credit or certain other means-tested benefits will no longer receive the winter fuel payment from this year onwards.
Ms Reeves defended the move, telling Nick: "We are in an extraordinary position where we had to close a £22 billion gap this year in our public finances."
Read more: Junior doctors reach improved pay deal to increase wages by 20 per cent over two years
Watch Again: Chancellor Rachel Reeves speaks to Nick Ferrari | 30/07/24
At the same time, the government and junior doctors reached a pay deal that could see their wages increase by 20 per cent across two years. This will cost around £350 million.
Overall, some public sector workers will get a pay rise that will cost the taxpayer of over £9 billion, following a recommendation by an independent pay review body.
Ms Reeves said: "We are in a situation where last year alone, the cost of industrial action in our national health service cost our economy £1.7 billion, and it cost 1.4 million cancelled operations and appointments.
"We couldn't continue to go on like this, so it was the right thing to do to accept those independent pay review bodies."
Ms Reeves added that the government wants to "draw a line" under NHS strikes.
She added: "People voted for change three and a half [weeks] ago, and part of the change that people wanted to see is an NHS that is actually working and functioning again.
"We've got a 7.6 million waiting list in the NHS, 1.4 million cancelled operations and appointments last year because of industrial action.
"We have to get our NHS working again."
Rachel Reeves' ‘£20bn black hole’ claim paves way for tax rises
Ms Reeves added of the cuts: "This is not a decision I wanted to make. It's not a decision I expected to make. But we had to take action to close that gap."
Some have suggested that the "black hole" should not have been a surprise to Ms Reeves. But she said that she and officials the OBR had not been given "the true facts about the state of the public finances and public spending".
The Chancellor also refused to rule out further changes to pension tax relief, or HS2 terminating in the suburbs of London rather than Euston.
Ms Reeves said yesterday that the Tories had hidden the extent of the hole in public finances, leaving the new Labour government with the worst inheritance since the war.
She said the Tories "gave false hope to Britain"."The inheritance from the previous government is unforgivable."After the chaos of 'partygate', when they knew trust in politics was at an all-time low, they gave false hope to Britain.
"When people were already being hurt by their cost-of-living crisis, they promised solutions that they knew could never be paid for.
"Roads that would never be built. Public transport that would never arrive. Hospitals that would never treat a single patient.
"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."
