The Chancellor of the Exchequer (Rachel Reeves)
Before I begin my statement, my thoughts and prayers are with those affected by the events in Southport, and I am sure that the whole House will join me in paying tribute to our emergency services who are dealing with this ongoing situation.
On my first day as Chancellor of the Exchequer, I asked Treasury officials to assess the state of public spending. That work is now complete and I am today presenting it to this House. In this statement, I will do three things. First, I will expose the scale—and the seriousness—of what has been uncovered; second, I will lay out the immediate action that we are taking to deal with the inheritance; and third, I will set out our longer-term plans to fix the foundations of our economy. Let me take each of these points in turn.
First, I turn to the inheritance. Before the election, I said that we would face the worst inheritance since the second world war: taxes at a 70-year high, debt through the roof, and an economy only just coming out of recession. I knew all of those things, and during the campaign, I was honest about them and about the difficult choices that they meant. The British people knew them too. That is why they voted for change. But upon my arrival at the Treasury three weeks ago, it became clear that there were things that I did not know—[Interruption.]
Mr Speaker
Order. This is an important statement for all constituents, including mine. If I am struggling to hear it, they are struggling at home as well. You will all get your chance to ask questions; I think it is more important to hear, and then comment.
Rachel Reeves
There were things that the Conservative party covered up—covered up from the Opposition, from this House and from the country. That is why today we are publishing a detailed audit of the real spending situation, a copy of which will be laid in the House of Commons Library. I take this opportunity to thank the Chief Secretary to the Treasury, my right hon. Friend the Member for Bristol North West (Darren Jones), for his leadership, and Treasury officials for all their work in producing this document.
Let me now explain what that document has uncovered. The previous Government published their plans for day-to-day spending in the spring Budget in March, but when I arrived at the Treasury, I was alerted by officials on the very first day that that was not how much the Government had expected to spend this year. It was not even close; in fact, the total pressure on those budgets across a range of areas was an additional £35 billion. Once we account for the slippage in budgets that we usually see over a year and the reserve of £9 billion designed to respond to genuinely unexpected events, that means that we have inherited a projected overspend of £22 billion. That is a £22 billion hole in the public finances now—not in the future, but now. It is £22 billion of spending this year that was covered up by the Conservative party. If left unaddressed, it would mean a 25% increase in the budget deficit this year, so today I will set out the necessary and urgent work that I have already done to reduce that pressure on the public finances by £5.5 billion this year and over £8 billion next year.
Let me be clear: I am not talking about costs for future years that the previous Government signed up to but did not include, like the compensation for infected blood, which has cross-party support. I am not talking about the state of public services in the future, like the crisis in our prisons that they have left for us to fix. I am talking about the money that the previous Government were already spending this year and had no ability to pay for, which they hid from the country. They had exhausted the reserve and they knew that, but nobody else did. They ducked the difficult decisions, put party before country, and continued to make unfunded commitment after unfunded commitment, knowing that the money was not there. That has resulted in the position that we have now inherited: the reserve was spent more than three times over only three months into the financial year, and the previous Government told no one.
The scale of this overspend is not sustainable, and to not act is simply not an option. This month, we have seen official Office for National Statistics figures showing that borrowing is higher this year than the Office for Budget Responsibility expected, and the disaster of Liz Truss’s mini-Budget shows what happens if we do not take tough decisions to maintain economic stability. Some, including the Leader of the Opposition and the shadow Chancellor, the right hon. Member for Godalming and Ash (Jeremy Hunt), have claimed that the books were open. How dare they? It is not true, and I will tell the House why: there are very clear instances of specific budgets that were overspent and unfunded promises that were made, but that—crucially—the OBR was not aware of for its March forecast. I will take each in turn.
The first is the asylum system. The forecast for the number of asylum seekers has risen dramatically since the last spending review, and costs for asylum support have risen sevenfold in the past three years, but instead of reflecting those costs in the Home Office budget for this year, the previous Government covered up the true extent of the crisis and its spending implications. The document I am publishing today reveals a projected overspend on the asylum system, including the previous Government’s failed Rwanda plan, of more than £6.4 billion for this year alone. That figure was unfunded and undisclosed.
Next, in the wake of the pandemic, demand for rail services fell. Instead of developing a proper plan to adjust to that new reality, the Government handed out cash to rail companies to make up for passenger shortfalls, but failed to budget for this adequately. Because of that, and because of industrial action, there is now an overspend of £1.6 billion in the transport budget. That was unfunded and undisclosed.
Since 2022, the Government, with the support of the whole House, have rightly provided military assistance to Ukraine in response to the Russian invasion. The spending audit found that there was not enough money set aside in the reserve to fund all these costs. We will continue to honour these commitments in full, and unlike the previous Government, we will make sure that they are always fully funded.
On top of these new pressures, since 2021 inflation was above the Bank of England’s target for 33 months in a row—hitting 11% at its peak—but the previous Government had not held a spending review since 2021, which means that they never fully reflected the impact of inflation in departmental budgets. That had a direct impact on budgets for public sector pay.
When the last spending review was conducted, it was assumed that pay awards would be 2% this year. Ordinarily, the Government are expected to give evidence to the pay review bodies on affordability, but extraordinarily, this year the previous Government provided no guidance on what could or could not be afforded to the pay review bodies. That is almost unheard of, but that is exactly what they did. Worse still, the former Education Secretary had the pay review body recommendations sitting on her desk. Instead of responding and dealing with the consequences, the Government shirked the decisions that needed to be taken.
I will not repeat the previous Government’s mistakes. Where they provided no transparency to the public, and no certainty for public services, we will be open about the decisions that are needed and the steps that we are taking. That begins with accepting in full the recommendations of the independent pay review bodies. The details of these awards are being published today. That is the right decision for the people who work in, and most importantly the people who use, our public services. It gives hard-working staff the pay rises they deserve while ensuring that we can recruit and retain the people we need.
It should not have taken this long to come to these decisions and I do not want us to be in this position again, so I will consider options to reform the timetable for responding to the pay review bodies in the future. This decision is in the best interests of our economy too: the last Government presided over the worst set of strikes in a generation, which caused chaos and misery for the British public and wreaked havoc on the public finances. Industrial action in the NHS alone cost the taxpayer £1.7 billion last year. That is why I am pleased to announce today that the Government have agreed an offer to the junior doctors that the British Medical Association is recommending to its members.
My right hon. Friend the Health Secretary will set out further details. Let me pay tribute to him: his leadership on the issue has paved the way to ending a dispute that has caused waiting lists to spiral, operations to be delayed and agony for patients to be prolonged. Today marks the start of a new relationship between the Government and staff working in our national health service, and the whole country will welcome that.
Where the previous Government ducked the difficult decisions, I am taking action. Knowing what they did about the state of the public finances, they continued to make unfunded commitment after unfunded commitment that they knew they could not afford, putting party before country and leaving us with an overspend of £22 billion this year. Where they presided over recklessness, I will bring responsibility. I will take immediate action. Let me set it out in detail.
On pay, I have today set out our decision to meet the recommendations of the pay review bodies. Because the previous Government failed to prepare for these recommendations in the departmental budgets, they come at an additional cost of £9 billion this year. The first difficult choice I am making is to ask all Departments to find savings to absorb as much of this as possible, totalling at least £3 billion. To support Departments as they do this, I will work with them to find savings ahead of the autumn Budget, including through measures to stop all non-essential spending on consultancy and Government communications. I am also taking action to ask Departments to find 2% savings in their back-office costs.
I will now deal with a series of commitments made by the previous Government that they did not fund, because if we cannot afford it, we cannot do it. First, at the Conservative party conference last year, the former Prime Minister announced the introduction of a new qualification: the advanced British standard. That is a commitment costing nearly £200 million next year, rising to billions across future years. This was supposed to be the former Prime Minister’s legacy, but it turns out that he did not put aside a single penny to pay for it. So we will not go ahead with that policy, because if we cannot afford it, we cannot do it.
Next, the Illegal Migration Act 2023, passed by the previous Government, made it impossible to process asylum applications or remove people who have no right to be here.
Instead, they relied on a doomed policy to send asylum seekers to Rwanda on planes that never took off, leaving tens of thousands of people stuck in hotels on the public purse. We need a properly controlled and managed asylum system where rules are enforced, so that those with no right to be here are swiftly removed. So we have scrapped their failed Rwanda scheme, which placed huge pressure on the Home Office budget. To bring down these costs as soon as possible, my right hon. Friend the Home Secretary has already laid legislation to remove the retrospective element of the Illegal Migration Act, which will significantly reduce the use of hotel accommodation. These measures will save nearly £800 million this year and avoid costs spiralling even further next year. This was a bad use of taxpayers’ money, and we will not do it.
The previous Government claimed they were levelling up the country. They made promise after promise to the British people, but the spending audit has uncovered that some of those commitments were not worth the paper that they were written on. At autumn statement last year, the former Chancellor announced £150 million for an investment opportunity fund, but not a single project has been supported from that fund.
So following discussions with my right hon. Friend the Deputy Prime Minister, I am cancelling it today, because if we cannot afford it, we cannot do it.
The previous Government also made a series of commitments on transport, promises that people expected to be delivered and promises that many Members across this House campaigned on in good faith, but the Conservative party has failed them. We have seen from the National Audit Office the chaos that the previous Government presided over, with projects over budget and delayed again and again. The spending audit has revealed £1 billion of unfunded transport projects that have been committed to next year, so my right hon. Friend the Transport Secretary will undertake a thorough review of these commitments. As part of that work, she has agreed not to move forwards with projects that the previous Government refused to publicly cancel, despite knowing full well that they were unaffordable. That includes proposed work on the A303 and the A27, and my right hon. Friend will also cancel the restoring your railway programme, saving £85 million next year, with individual projects to be assessed through her review. If we cannot afford it, we cannot do it.
The previous Government had plans for a retail sale of NatWest shares. We intend to fully exit our shareholding in NatWest by 2025-26. But having considered advice, I have concluded that a retail share sale offer would involve significant discounts that could cost taxpayers hundreds of millions of pounds. It would therefore not represent value for money, and it will not go ahead. It is a bad use of taxpayers’ money, and we will not do it.
Next, let me address the unfunded pressures in our NHS and our social care sector.
In October 2020, the Government announced that 40 new hospitals would be built by 2030. Since then, only one new project has opened to patients, and only six have started their main construction activity. The National Audit Office was clear that delivery was wildly off track, but since coming into office, it has become clear that the previous Government continued to maintain their commitment to 40 hospitals without anywhere close to the funding required to deliver them. That gave our constituents false hope. We need to be straight with the British people about what is deliverable and what is affordable, so we will conduct a complete review of the new hospital programme, with a thorough, realistic and costed timetable for delivery.
Adult social care was also neglected by the previous Government. The sector needs reform to improve care and to support staff. In the previous Parliament, the Government made costly commitments to introduce adult social care charging reforms, but they delayed them two years ago because they knew that local authorities were not ready and that their promises were not funded, so it will not be possible to take forward those charging reforms. This will save over £1 billion by the end of next year.
Mr Speaker
Order. I want Government Members to be quiet as well—I want to hear the Chancellor of the Exchequer.
Rachel Reeves
I can understand why people, and Members, are angry. I am angry too. The previous Government let people down. The previous Government made commitment after commitment without knowing where the money was going to come from. They did this repeatedly, knowingly and deliberately.
Today, I am calling out the Conservatives’ cover-up and I am taking the first steps to clean up what they have left behind, but the scale of the inheritance we have been left means that the decisions we have so far announced will not be enough. This level of overspend is not sustainable. Left unchecked, it is a risk to economic stability—and unlike the Conservative party, I will never take risks with our country’s economic stability. It therefore falls to us to take the difficult decisions now to make further in-year savings.
The scale of the situation we are dealing with means incredibly tough choices. I repeat today the commitment that we made in our manifesto to protect the triple lock, but today I am making the difficult decision that those not in receipt of pension credit or certain other means-tested benefits will no longer receive the winter fuel payment, from this year onwards. The Government will continue to provide winter fuel payments worth £200 to households receiving pension credit or £300 to households in receipt of pension credit with someone over the age of 80. Let me be clear: this is not a decision I wanted to make, nor is it the one that I expected to make, but these are the necessary and urgent decisions that I must make. It is the responsible thing to do to fix the foundations of our economy and bring back economic stability.
Alongside this change, I will work with my right hon. Friend the Work and Pensions Secretary to maximise the take-up of pension credit by bringing forward the administration of housing benefit and pension credit, repeatedly pushed back by the previous Government, and by working with older people’s charities and local authorities to raise awareness of pension credit and help identify households not claiming it.
This is the beginning of a process, not the end. I am announcing today that I will hold a Budget on 30 October, alongside a full economic and fiscal forecast from the Office for Budget Responsibility. I have to tell the House that the Budget will involve taking difficult decisions to meet our fiscal rules across spending, welfare and tax. [Hon. Members: “Ah!”] Mr Speaker, they still don’t get it, do they? Parties in Downing Street, crashing the economy, gambling on the election—party before country, every single time.
It will be a Budget to fix the foundations of our economy, and it will be a Budget built on the principles that this new Government were elected on. First, we will treat taxpayers’ money with respect by ensuring that every pound is well spent, and we will interrogate every line of public spending to ensure that it represents value for money. Secondly, I can repeat from the Dispatch Box our manifesto commitment that we will not increase taxes on working people. That means that we will not increase national insurance, the basic, higher or additional rates of income tax, or VAT. Today, my hon. Friend the Exchequer Secretary is publishing further detail on our manifesto commitments to close tax loopholes and clamp down on tax avoidance to ensure that we bring in that money as quickly as possible. My third principle is that we will meet our fiscal rules: we will move the current budget into balance and we will get debt falling as a share of the economy by the end of the forecast.
These are the principles that will guide me at the Budget, but let me be honest: challenging trade-offs will remain, so today I am launching a multi-year spending review. This review will set departmental budgets for at least three years, providing the long-term certainty that has been lacking for too long. As part of that process, final budgets for this year and budgets for next year, 2025-26, will be set alongside the Budget on 30 October.
I will look closely at our welfare system, because if someone can work, they should work. That is a principle of this Government, yet under the previous Government, welfare spending ballooned, while inactivity has risen sharply in recent years. We will ensure that the welfare system is focused on supporting people into employment, and we will assess the unacceptable levels of fraud and error in our welfare system and take forward action to bring that down.
To fix the foundations of our economy, we must ensure that never again can a Government keep from the public the true state of our public finances. The fiscal framework I have inherited had several flaws. It allowed the Government to run down the clock on departmental budgets to avoid difficult decisions and to push them back beyond the election, so I am announcing the most significant set of changes to our framework since the inception of the Office for Budget Responsibility. These changes will come into effect in the autumn.
First, we have introduced legislation to ensure that we can never again see a repeat of the mini-Budget. Secondly, we will require the Treasury to share with the Office for Budget Responsibility its assessment of immediate public spending pressures, and we will enshrine that rule in the charter for budget responsibility, so that no Government can ever again cover up the true state of our public finances. Finally, we will ensure that never again do public service budgets get set at only a few months’ notice. Instead, spending reviews will take place every two years, with a minimum planning horizon of three years, to avoid uncertainty for Departments and to boost stability for our public finances. I have already spoken to the chair of the Office for Budget Responsibility to brief him on the findings of our audit and our reforms.
By launching the spending review, I am also today starting the firing gun on a new approach to public service reform to drive greater productivity in the public sector. We will embed an approach to government that is mission-led, that is reform-driven, with a greater focus on prevention and the integration of services at a national and local level, and that is enabled by new technology, including through the work of my right hon. Friend the Secretary of State for Science, Innovation and Technology on the opportunities of artificial intelligence to improve our public services. We will establish a new office of value for money, with an immediate focus on identifying areas where we can reduce or stop spending, or improve its value.
We will appoint a covid corruption commissioner to bring back money that is owed to taxpayers after contracts worth billions of pounds were handed out by the previous Government during the pandemic. Ahead of the spending review, I will also review the cost of our political system, including restricting eligibility for ministerial severance payments based on time in office. I expect all levels of government to be run effectively and efficiently, and I will work with leaders across our country to deliver just that. That means effective local government, a civil service delivering good value for the British taxpayer and reform of our political institutions, including the House of Lords, to keep costs as low as possible.
The Budget and spending review will also set out further progress on our No. 1 mission: to grow our economy. Economic growth is the only way to sustainably improve our public services and our public finances, so we will use the spending review to prioritise specific areas of capital investment that leverage in billions more in private investment. It will not happen overnight—it will take time and it will take focus—but we have already made significant progress, including: planning reforms to get Britain building; a national wealth fund to catalyse private investment; a pensions investment review to unlock capital for our businesses; Skills England to create a shared national ambition to boost skills across our country; and work across government on a new industrial strategy, driven forward by a growth mission board, to ensure that we deliver on our commitments.
Our country has fundamental strengths on which we can build, and I look forward to welcoming business leaders to the international investment summit in Britain later this year. I know that if we can create the stable conditions that investors need to thrive, we will return confidence to our economy so that entrepreneurs and businesses big and small know that this is the best place in the world to start and grow a business. That is the bedrock on which economic growth must be built.
The inheritance from the previous Government is unforgiveable. After the chaos of partygate, when they knew that 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 and 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. Then, in the election—perhaps this is the most shocking part—they campaigned on a platform to do it all over again, with more unfunded tax cuts and more spending pledges, all the time knowing that they had no ability to pay for them. No regard for the taxpayer. No respect for ordinary, hard-working people.
I will never do that. I will restore our country’s economic stability. I will make the tough choices. I will fix the foundations of our economy so that we can rebuild Britain and make every part of our country better off. I commend this statement to the House.
Jeremy Hunt
The Chancellor says that the information is new, but she told the Financial Times:
“You don’t need to win an election to find”
out the state of public finances, as
“We’ve got the OBR now.”
Paul Johnson of the Institute for Fiscal Studies has said:
“The state of public finances were apparent pre-election to anyone who cared to look”
which is why he and other independent figures say that her argument is not credible and will not wash.
Those public finances were audited by the OBR just 10 weeks before the election was called. We are now expected to believe that, in that short period, a £20 billion black hole has magically emerged, but for every single day in that period—in fact, since January, in line with constitutional convention—the right hon. Lady had privileged access to the Treasury permanent secretary. She could have found out absolutely anything she needed. Will she confirm to the House that she did have meetings with the permanent secretary of the Treasury before the election? Will she tell the House whether they discussed public finances? Will she tell the House whether they discussed any of the pressures that she is talking about today? If so, why are we only hearing today what she wants to do about them? That is why today’s exercise is not economic—it is political.
The Chancellor wants to blame the last Conservative Government for tax rises and project cancellations that she has been planning all along. The trouble is, even her own published numbers expose the fiction behind today’s announcement. Just four days ago, she presented to the House the Government’s estimates of spending plans for the year. Those estimates are a legal requirement. The official guidance manual is clear that Departments are responsible for ensuring that estimates are consistent with their “best forecast of requirements”. They are signed off by the most senior civil servants—the accounting officers—in every Department. Yet, four days on, she is saying that those estimates are wrong. Who is right: politically neutral civil servants or a political Chancellor? If she is right, will she ask the cabinet secretary to investigate those civil servants and apologise to the House for laying misleading estimates? Of course not, because she knows that those civil servants are right and today’s black hole is spurious, just like when she says that she inherited the
“worst set of economic circumstances”
since the second world war. When BBC Verify asked a professor at the London School of Economics about that claim, he responded:
“I struggle to find a metric that would make that statement correct.”
The metrics speak for themselves. Inflation is 2% today —nearly half what it was in 2010 when we had to clear up the mess inherited from a Labour Government. Unemployment is nearly half what it was then, with more new jobs than nearly anywhere else in Europe. So far this year, we are the fastest growing G7 economy. Over the next six years, the IMF says that we will grow faster than France, Italy, Germany and Japan.
Just two days before the election was called, the managing director of the IMF praised the previous Government’s handling of the economy, and said it was in a good place. This week, the Institute for Fiscal Studies said that it was
“not a bad situation to take charge of”
and certainly not comparable to the 1940s or 1970s. If the right hon. Lady is in charge of the economy, it is time to stop trash talking it. What is the point of going to New York or Brazil to bang the drum for more investment if she comes home with a cock and bull story about how bad everything is? She should stop playing politics with Britain’s reputation and get on with running the economy.
When it comes to public finances, will the Chancellor confirm to the House that, far from being broke and broken, as Downing Street briefed the media, the forecast deficit today is 4.4%, compared with 10.3% when Labour left office in 2010? In other words, when Labour was last in office, we were borrowing double the current levels. Will she confirm another difference between today and 2010? The Conservatives came to office then, honest about our plans and saying straightforwardly that we needed to cut the deficit. She has just won an election telling us repeatedly that taxes will not go up. How many seats were won on the back of commitments not to raise tax, while she is quietly planning to do the exact opposite?
On the details that the Chancellor has announced today, will she confirm that around half of today’s fictitious black hole comes from discretionary public sector pay awards—in other words, not something that she has to do, but something where she has a choice? Will she confirm to the House that, apart from the teachers recommendation, none of the other pay review body recommendations was seen by the last Government, as they arrived after the election was called? Today she has chosen to accept those recommendations, but before doing so, was she advised by officials to ask unions for productivity enhancements before accepting above-inflation pay awards, to help to pay for those awards, as the last Government did? If she was advised to do that, why did she reject that advice and simply tell the unions, “Here’s your money, thanks for your support”? Will she confirm—[Interruption.] I know Labour Members do not like the truth, but here it is. Will she confirm that one of the reasons for her funding gap is that she has chosen to backdate a 22% pay award to junior doctors, to cover the time when they were striking?
We are just three months into the financial year, so why did the Chancellor not mention today that, at the start of the year, the Treasury had a reserve of £14 billion for unexpected revenue costs, and £4 billion for unexpected capital costs? Additionally, why has she not accounted for the Treasury’s ability to manage down in-year pressures on the reserve—last year alone by £9 billion? Why has she apparently not accounted for underspends—typically £12 billion a year? Has she totally abandoned the £12 billion of welfare savings planned by the last Government? If so, will she confirm that to the House? Has she also abandoned £20 billion of annual productivity savings planned by the last Government? If not, why are they not in her numbers? Finally, for someone who claims continuously the mantle of fiscal rectitude, will she confirm that in order to pay for her public spending plans, she will not change her fiscal rules to target a different debt measure, so she can increase borrowing and debt by the back door?
Every Chancellor faces pressures on public finances. After a pandemic and an energy crisis, those pressures are particularly challenging, which is why in autumn 2022, the previous Government took painful but necessary decisions on tax and spend. But we knew that, if we continued to take difficult decisions on pay, productivity and welfare reform, we could live within our means and start to bring taxes down. She, on the other hand, knew perfectly well that a Labour Government would duck those difficult decisions. She has caved in to the unions on pay, left welfare reform out of the King’s Speech and soft-pedalled on our productivity programme. That is a choice, not a necessity.
That choice means that taxes will have to go up and the right hon. Lady chose not to tell us before the election. Instead, in 24 days—just 24 days—she has announced £7.3 billion for GB Energy, £8.3 billion for the national wealth fund and around £10 billion for public sector pay awards. That is £24 billion in 24 days: around £1 billion for every day she has been in office, leaving taxpayers to pick up the tab for her profligacy.
Doing it this way, she makes the first major misstep of her time as Chancellor, because that great office of state depends more than any on trust—[Interruption.] In her first big moment, she breaks that trust with an utterly bogus attempt to hoodwink the public about the choices she has. Over 50 times in the election, Labour told us it had no plans to raise taxes. Now, in a U-turn that will forever shame this Labour Government, she is laying the ground to break her word. When she does, her first Budget will become the biggest betrayal in history by a new Chancellor. Working families will never forgive her.
Rachel Reeves
The shadow Chancellor had an opportunity this afternoon to admit what he had done, the legacy he had left. Instead, he takes no responsibility. The word the country was looking for today was sorry. He could not find those words; no wonder the Conservative party so definitively lost the trust of the British people at the election three and a half weeks ago. We say never again. [Interruption.] Never again should a party that plays fast and loose with the public finances be in charge of the public finances—[Interruption.]
Mr Speaker
Order. Can I just say to the Whips, who hold responsible jobs and I expect them to keep them that way, that just because they might not be at the end of the Bench does not mean they have to chunter all the way through and pass comment? I don’t need it and I won’t put up with it.
Rachel Reeves
First, specifically on the black hole, we could not have known these numbers because the Conservative party did not tell the OBR these numbers. That is why we are in the position we are in today. That is the biggest scandal of them all.
The shadow Chancellor asks about the estimates. He should recognise the estimates we laid yesterday because he produced them. We had to lay those estimates to allow public spending to continue, but since those estimates were produced, information was given to us by Treasury officials about the true scale of the overspending by the Conservative party.
The shadow Chancellor mentions the IFS. Paul Johnson from the IFS has just said that it appears that these overspends are genuinely unfunded—words not from me, but from the independent IFS, which the shadow Chancellor referenced.
The shadow Chancellor mentions what happened to the reserve. Well, the reserve has been spent, shadow Chancellor. It was spent by you three times over. That is why we are in a position of a £22 billion in-year gap between spending that was happening and the funding to produce it.
If the shadow Chancellor could do all the things he spoke about today, why were they not in the forecasts? If he was able, as he says, to make those in-year changes on welfare and productivity, they would have been in the forecasts. They were not.
On the issue of the pay review bodies, the previous Government set the remit for those but they refused to give them any indication of affordability. That is almost unprecedented. The teachers reported before the election and that recommendation sat on the former Education Secretary’s desk. Today, we are drawing a line on the industrial action: the £1.7 billion cost to the NHS alone last year and 1.4 million cancelled appointments. We are incorporating a third of those pay increases into efficiencies in our public services, as the shadow Chancellor suggested we should.
When it comes to tax, I am not going to take any lessons from the Conservative party. The Conservative party took the tax burden to the highest level in 70 years.
The response of the shadow Chancellor just confirms what we already knew: the previous Government were deluded, out of touch and grossly irresponsible. Today, we begin to fix the mess that they have created.
Mr Clive Betts (Sheffield South East) (Lab)
In 2010, we repeatedly heard the words, “The Labour Government did not fix the roof while the sun was shining.” Is it not the case that the last Government not only did not fix the roof, but destroyed the entire foundations of our public services?
In the context of difficult decisions, I welcome two points made by my right hon. Friend. First, there was the encouragement to work with local councils to increase the take-up of pension credit. The Levelling Up, Housing and Communities Committee called for that repeatedly in the last Parliament, but it was not taken up. Secondly, can the Chancellor confirm that she intends to provide multi-year settlements, ultimately, for local councils, which—again—have called for that repeatedly? It would be a welcome step to help them with the very difficult financial situation that they are facing.
Rachel Reeves
I can confirm that we will be arranging multi-year settlements with local authorities, as well as with Departments. It is extremely important that both Departments and authorities can plan for the future knowing what money is available, rather than running down the clock towards the end of the year.
I thank my hon. Friend for welcoming the announcement that I made today about working with local government to improve the take-up of pension credit. It is woeful that it is so low. It is vital that everyone receives the money to which they are entitled, especially pensioners, which is why we have taken on those recommendations from elderly people’s charities today to ensure that we work with local government to boost take-up of that benefit.
Sarah Olney (Richmond Park) (LD)
I thank the Chancellor for advance sight of her statement. Let me associate myself with the expressions of gratitude to our emergency services; the thoughts of all Liberal Democrats are with those affected by the incident in Southport.
Years of Conservative chaos and mismanagement have left our economy on life support and in desperate need of emergency care. Things cannot go on like this any longer. We must now revive growth by getting people off NHS waiting lists and back into work, so we urge the Government to invest wisely in GPs, dentists and hospitals, not only to support patients but to improve efficiency in the NHS and deliver the growth that is so desperately needed after years of Conservative failure.
The outgoing Conservative Government will go down in the history books as one of the most damaging Administrations that our country has seen, and today’s statement has thrown that picture into even starker relief. It was not just their catastrophic mini-Budget; we saw a vicious cycle of stagnation and recession, driven by years of chaos and uncertainty. For the first time, living standards declined over the course of a Parliament as people experienced the harshest cost of living crisis in generations. Our public services were abandoned: waiting lists soared, schools crumbled, and our social care was in crisis. The dire state in which the Conservatives left our public finances is indicative of their irresponsibility.
People are painfully aware that Conservative chaos has real-life consequences. Interest rates were sent soaring, and millions of people saw their mortgage payments increase by hundreds of pounds a month. That is why, more than ever, we need to foster economic stability to draw a line under the uncertainty of the last few years. An important step in rebuilding confidence in our economy is the setting up of a long-term industrial strategy. That will help to unlock vital investment, create good jobs, and help us to tackle the climate emergency. Will the Chancellor reassure the House that the Government will start work on such a strategy as soon as practically possible?
We cannot talk about rebuilding our economy without talking about the crisis in health and social care. Millions have long-term health conditions that make them too ill to work, and millions more are stuck on NHS waiting lists. Many others cannot leave hospital because there is no care provision. The Liberal Democrats have always understood that we cannot have a thriving economy and strong public finances until we fix the crisis in health and social care, which is why we put forward detailed proposals to deliver more GPs, invest in dental services, and cut ambulance waiting times. Equally, we must give people the good-quality care that they deserve, so we urge the Government to work across party lines to implement a system of free personal care and give our unpaid carers the proper support that they need. The last Conservative Administration left people with crippling care costs. That is why it is urgent for us to have cross-party talks on social care, and I urge the Government to begin those as soon as they possibly can.
Investing in health and care is not just about giving people the fair deal that they deserve; it is also about sound management of our public finances. Will the Chancellor guarantee that the NHS and social care will be at the heart of her plans to address the Conservative party’s legacy of mismanagement? Part of that legacy is the previous Government’s promise to deliver 40 new hospitals, which was postponed, redefined and never properly funded. It turned out to be yet another empty Conservative promise, but having listened to many colleagues on these Benches over the last few years, some hospitals are clearly in dire need of investment, with crumbling roofs and buckets to catch the leaks. Will the Chancellor meet Members whose constituents will be affected by today’s announcement, to hear directly about the situation in their hospitals?
Lastly, let me turn to the other side of the equation: securing the funding that our public services so desperately need. Over the last Parliament, we saw the Conservative party raise taxes on hard-working households again and again, just to pay for its own mistakes. Does the Chancellor agree that it would be unfair to ask working people to pick up the tab a second time, after they have already suffered through years of painful tax rises? My party has set out detailed proposals to raise funding for our public services in a fair way—for example, by reversing the Conservatives’ tax cuts for big banks, putting in place a proper windfall tax on oil and gas producers, and raising the digital services tax on social media giants. I urge the Chancellor to draw from these ideas, which could raise billions of pounds by asking some of the largest companies in the world to pay their fair share.
There is no doubt that our economy, our public services and our public finances have been left in a precarious position. Now the hard work must be done to repair the damage and return stability, growth and prosperity to our country. That is what the Liberal Democrats will always champion, and we sincerely hope that the Government will look closely at our proposals to end the crisis in health and social care, grow our economy and give people a fair deal.
Rachel Reeves
I thank the hon. Lady for her contribution, particularly the theme about helping people into work and fixing our national health service. I totally agree with her about the immense damage that the Tory mini-Budget did, particularly in pushing up mortgage costs for so many of our constituents.
The hon. Lady asks about industrial strategy. My right hon. Friend the Business and Trade Secretary will be setting out more details of the modern industrial strategy, which will enable us to work in partnership with business to exploit the big opportunities that the country and the economy have for growth and prosperity in all parts of the UK.
The hon. Lady asks about health and social care. She is absolutely right to highlight the huge challenge of the waiting list—it was at 7.6 million when the Conservatives left office. I welcome the deal to get junior doctors back to work, and I am sure the whole country will, because it will mean that people can get operations and treatment when they need. After last year’s industrial action cost our economy £1.7 billion and caused 1.4 million appointments to be missed, the deal will be welcomed by people on NHS waiting lists. Of course, this Government have made a commitment to provide 40,000 additional appointments every single week. That is why we will crack down on tax avoidance and ensure that, finally, non-doms who make their home in Britain pay their fair share of tax here.
My right hon. Friend the Health Secretary will meet constituents who are affected by the previous Government’s betrayal on building 40 new hospitals, because we recognise, as the hon. Lady says, the importance of ensuring that all our constituents have the health services they deserve. I could not agree more with her that it should not be working people who pick up the tab for the Conservative party’s failure. That is why I have restated our commitment not to increase taxes on working people—there will be no increases in income tax, national insurance or VAT. That is the commitment on which we campaigned in this election, and I stand by that commitment.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I congratulate my right hon. Friend and the Labour Government on making such a strong start, and particularly on the emphasis on transparency and accountability for the hard-earned money of our tax-paying constituents. She said that the Treasury will be asked to share with the Office for Budget Responsibility its assessment of immediate public spending pressures, and that she wants to enshrine that rule in the charter for budget responsibility. Will she also make sure that that is a public document that is reported to Parliament, to maintain this vital transparency going forward?
Rachel Reeves
I thank my hon. Friend for her question. She speaks from her experience as Chair of the Public Accounts Committee, and I agree with her entirely. The charter for budget responsibility will be published. We have already introduced legislation for the new fiscal lock that we set out in our manifesto, so that we can ensure that a Government can never again do what the previous Government did, which was to overspend by £22 billion within one year.
Dame Harriett Baldwin (West Worcestershire) (Con)
What a chilling political choice, to choose to take away the winter fuel allowance from a 90-year-old on an income of £10,000 a year. And that was a political choice. I want to ask the Chancellor more about productivity. She used the word once during her speech. What discussions has she had about improving productivity, which according to the Office for Budget Responsibility is still 5% lower in the public sector and has not recovered since the levels we enjoyed before the pandemic?
Rachel Reeves
The challenge of productivity sits across both the public and private sectors. In the last 14 years, productivity has flatlined in the public and private sectors and we need to boost both. We need to boost productivity in the public sector to ensure that we get better value for money for our public services, but we also need to improve productivity in our private sector so that we can improve living standards and have the money for our public services.
Jon Trickett (Normanton and Hemsworth) (Lab)
I welcome the Chancellor’s statement about public sector pay, but is it not clear that, after savaging public services, holding down public sector pay and driving 3 million people into food banks, this crazy ideological austerity programme of the Tories has failed massively while at the same time, the richest 250 people in the country gained wealth of £500 billion? Can I tempt the Chancellor to say that, while we accept that there are hard decisions to make, we reject the ideological commitment to this form of Tory austerity?
Rachel Reeves
I thank my hon. Friend for that question. We do owe it to our armed forces, our prison officers, our police officers, our nurses and our teachers to reward them properly for their work, and that is what we did today in implementing in full the recommendations of the pay review bodies. I echo his view that a return to austerity would be no way to run our economy. It resulted in growth haemorrhaging in the last Parliament, with all the damage that that did to living standards and to the money for our public services.
Robert Jenrick (Newark) (Con)
The Chancellor is like a dodgy car mechanic. She says she has done all the searches, she gives you a fixed price, you hand in your car keys and then, a few weeks later, she has found all these new problems. The price has doubled, but it is too late—you have given her your car and you both know that this was her plan all along. Trust and credibility are critical to a Chancellor. Why has she been so careless and so quick to throw hers away?
Rachel Reeves
If the right hon. Gentleman has any chance of fixing the mess that his previous Government made, he might want to start with an apology.
Sam Carling (North West Cambridgeshire) (Lab)
I thank the Chancellor for her honesty on the incredibly serious situation that she has just outlined. Does she agree that the above-inflation pay deals agreed by this Government with our public sector staff will begin the process of rebuilding trust between them and our Government and will benefit the public purse by reducing strike action?
Rachel Reeves
I thank my hon. Friend for that question. Let us just be clear that the pay recommendations today are in line with private sector pay. These are just the pay deals that are received by the majority of workers in the private sector. My hon. Friend is right that we owe a debt of gratitude to our frontline workers, who got us through the pandemic and so many other challenges over the last few years, and they deserve to be paid properly for their work.
Seamus Logan (Aberdeenshire North and Moray East) (SNP)
During the recent election campaign, we in the SNP repeatedly warned about an £18 billion hole in the Labour party’s spending plans. Now that the Chancellor has confirmed that today, will she apologise to those voters in Scotland who supported the Labour party leader in Scotland when he said:
“Read my lips, no austerity”?
Will she also reverse the 9% cut in Scotland’s capital allocation, please?
Rachel Reeves
I am not sure if hon. Gentleman was paying attention. The £22 billion black hole is this year. The Institute for Fiscal Studies was warning about a black hole of £18 billion over the lifetime of the Parliament. Those are two very different things and both of them can be true. What we are showing today is an in-year gap of £22 billion that the hon. Gentleman did not know about, that no one on this side of the House knew about, that the OBR did not know about, and that the country did not know about. This is new information that is being published today, above and beyond what anyone knew when we were campaigning in the election.
Ms Stella Creasy (Walthamstow) (Lab/Co-op)
Frankly, the Conservatives’ response leaves something to be desired. After 14 years of stripping the engine of this country’s economy, their response is simply taking the piston.
I am so proud that we now have a Chancellor who is not penny wise and pound foolish, but is conscious that all our constituents will have to pick up the pieces after the past 14 years. Can the Chancellor tell us a little more about her audit and what it has identified about the money wasted by the previous Government and their mismanagement of capital projects? We now know, for example, that the failure to rebuild Whipps Cross hospital has cost us an extra £15 million in the last few years alone. Our constituents will pay the price of the last Government for many years to come. This new Labour Government need to be honest with them. Sorry seems to be the hardest word for the Conservatives to say, but can the Chancellor tell us just how much money it will cost?
Rachel Reeves
This country is owed a £22 billion apology by the Conservative party, and my hon. Friend is right to highlight the overspends, including on the hospitals programme; there is a £4 billion gap between what was announced and what is needed for those hospitals. There is also a £6.4 billion overspend on the asylum system. That was all unfunded and undisclosed until I disclosed it today.
Mr Mark Francois (Rayleigh and Wickford) (Con)
I welcome the affirmation of the funding for Ukraine, which I presume was already fully allocated from the Treasury reserve, in the usual way.
On the mainstream defence budget, the Chancellor has announced that all departmental spending will now be reviewed every two years. Given the speed at which Whitehall works, this means that the minute one review is finished, work will start on the next. All public spending, particularly capital spending, will effectively be under permanent review. This will not work. How can we commit to 10-year defence programmes, such as the vital new Tempest fighter, if all departmental budgets are up in the air every two years?
Rachel Reeves
First, there is a £9 billion reserve for departmental expenditure, and it was spent three times over before I arrived in the Treasury. That is why we face these problems today.
Secondly, yes, we fully intend to set longer-term budgets for capital expenditure, but we will have three-year spending reviews every two years for day-to-day departmental expenditure, which is really important for giving certainty, so that Government Departments can plan for the future. Today, no Department or local authority knows its budget beyond next March. That is no position to put Departments in, including the Ministry of Defence.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I welcome my right hon. Friend’s statement, and particularly what she said about the public sector pay award. Could she share a little more about how, given the appalling economic conditions that we now face, she will incorporate equity in her decisions on how to address the in-year deficit?
Rachel Reeves
I have to be honest that the decisions I have made today are tough decisions. They are not the decisions that I wanted to make, or that I expected to make. Given the seriousness of the inheritance that I face, they are the right decisions, the responsible decisions, and the fairest decisions that I could make in the circumstances.
Daisy Cooper (St Albans) (LD)
The legacy of the Conservatives’ new hospitals programme is dire, but the Chancellor will know that there is also a cost to delay. We have life-expired buildings that will continue to need to be patched up until they are replaced, so I urge the Chancellor, as I urged the Secretary of State for Health and Social Care last week, to give the go-ahead to those projects that are ready to go and involve life-expired buildings. Will she review the outdated rules, and allow hospitals to spend more of their capital funds on helping with repairs and rebuilds?
Rachel Reeves
I welcome you to your place, Madam Deputy Speaker. My right hon. Friend the Secretary of State for Health and Social Care will meet with people affected. We were promised a new hospital in Leeds that has never been built, so I understand the concerns that right hon. and hon. Members have about the hospital programme. However, there is a £22 billion in-year overspend, which means taking incredibly difficult decisions. They are not the decisions that we would want to make, but they are responsible ones in the circumstances, given our dire inheritance from the Conservative party.
Dr Jeevun Sandher (Loughborough) (Lab)
I used to work in the Treasury; what we have heard today about the Conservative party is shocking and shameful. The Chancellor has set out how far away the last Government were from meeting their own targets on hospital building. Does she agree that our plan, by contrast, represents a deliverable way to ensure we get waiting lists down?
Rachel Reeves
My hon. Friend is welcome on the Government Benches with his expertise. Everything in our manifesto was fully costed and fully funded, including 40,000 additional NHS appointments every single week, which will be funded by cracking down on tax avoidance and ensuring that people who make their home in Britain pay their taxes here. We will finally deal with the terrible situation of non-doms claiming that they do not live in Britain for tax purposes, despite making their home here. Those people should contribute to the public purse; under Labour, they will.
Sir Julian Lewis (New Forest East) (Con)
Congratulations on your election, Madam Deputy Speaker.
I cannot hope to match the splendid double entendre of the hon. Member for Walthamstow (Ms Creasy), but I may I say to the Chancellor that one effect of being here for a long time is a realisation that no one party has a monopoly on wisdom? Given the impartial assessment by the Library that covid cost this country between £310 billion and £410 billion, is she willing to at least concede that the previous Government did a pretty good job in getting inflation down to 2% less than two years after the pandemic?
Rachel Reeves
The pandemic is no excuse for making unfunded spending commitments, which is precisely what the previous Government did. The right hon. Gentleman mentioned the pandemic, during which the Government handed out contracts to friends and donors to their party, putting them in a VIP lane. That is why we are appointing a covid corruption commissioner. We want that money back in our public services, where it belongs.
Bill Esterson (Sefton Central) (Lab)
Welcome to your place, Madam Deputy Speaker.
It was not just the public finances that the Conservatives mismanaged over 14 years; they failed to support industry too. Figures published today demonstrate that Britain has dropped out of the top 10 countries for manufacturing for the first time since the industrial revolution. I welcome my right hon. Friend’s commitment to leveraging millions more in private investment to make up for the record low levels of private investment we saw under the previous Government. Does she agree that the latest manufacturing figures show how critical it is that the Government work closely with business and trade unions on a long-term industrial strategy?
Rachel Reeves
I too saw the numbers today that show that Britian is out of the top 10 manufacturing countries, which is shameful given our history at the heart of the industrial revolution. I pay tribute to my hon. Friend for his work, which ensured that Labour went into the election as the most pro-business party. Through the reforms that we have already announced in our first three weeks in government—planning reforms, the creation of a national wealth fund, reform of our pension system and a modern industrial strategy—we will go about making Britain the best place to start and grow a business, and the best place to invest. We look forward to holding our international investment summit in the UK later this year.
Adrian Ramsay (Waveney Valley) (Green)
I have sympathy for the Chancellor’s seeking to address the issues that she has outlined, but the solutions that she has set out today are focused on spending cuts. Will she please say more about the opportunities that she is looking at for bringing revenue into the Exchequer, so that we can have the investment that is needed, whether in new hospitals—we all know that hospitals around the country are crumbling—or in the railways, as people are stuck in traffic jams and struggling with high rail fares? In particular, has she considered introducing a wealth tax? A tax on the very wealthiest in society—people with assets of more than £10 million—would raise tens of billions of pounds during this Parliament, and it could address the fact that we have growing billionaire wealth, while ordinary people are suffering from these cuts.
Rachel Reeves
I thank the hon. Gentleman for that question. I have just set out the non-dom tax loophole closures, and my hon. Friend the Exchequer Secretary has published a written ministerial statement today setting out our manifesto commitments around the energy profits levy, VAT on private schools, and the non-dom changes, which we will consult on and introduce in the Budget. We will not be introducing a wealth tax. We want this to be a great place for investors, and a wealth tax would have the opposite effect.
Claire Hazelgrove (Filton and Bradley Stoke) (Lab)
May I thank my right hon. Friend for her transparency and openness about the dire state of our inheritance from the Conservatives? The Tory leadership race is now clearly in full swing, which is important. People across the Filton and Bradley Stoke constituency, and across the country, deserve to know why none of the contenders came clean about this black hole when they were in government. Or were they kept in the dark by the Chancellor’s predecessor as well?
Rachel Reeves
Far be it from me to give advice to Tory leadership contestants, but if I were taking part in this contest, I would want to distance myself as much as possible from the Government in the previous Parliament who caused this terrible mess.
Graham Stuart (Beverley and Holderness) (Con)
The Chancellor committed to long-term planning for capital expenditure. Last March, the then Chancellor committed £20 billion to carbon capture, usage and storage, without which a net zero future cannot be delivered. In the light of the right hon. Lady’s review, can she set out for the House what commitment this Government will make to investment, including to that £20 billion for CCUS?
Rachel Reeves
We have already created a national wealth fund, which will leverage in billions of pounds of private sector investment, including in carbon capture and storage, as well as green hydrogen and renewable-ready ports. We will set out all our spending in the spending review later this year.
Dawn Butler (Brent East) (Lab)
Congratulations on your appointment, Madam Deputy Speaker. It feels really good to be back on the Government Benches. The annual accounts of the Department of Health and Social Care show that £9.9 billion spent on personal protective equipment was written off. Does the Chancellor agree that we could claw back this money through the covid corruption commissioner, and then possibly use some of it to eradicate child poverty?
Rachel Reeves
I thank my hon. Friend for that question. It is to the previous Government’s huge shame that they spent billions of pounds of taxpayers’ money on VIP-lane contracts, and on PPE that was never used; in some cases, it has literally gone up in smoke and been burned. We are appointing a covid corruption commissioner because that money belongs not in the pockets of Tory donors, but in our public services, and we will do everything within our power to get their money back.
Ben Obese-Jecty (Huntingdon) (Con)
Last week, the Secretary of State for Health and Social Care said:
“Hospitals with reinforced autoclaved aerated concrete are at the top of my list of priorities.”—[Official Report, 23 July 2024; Vol. 752, c. 517.]
If the new hospitals programme is delayed via review, so will be the rebuilding of the five RAAC hospitals that are not among the 40 referenced. Without avoiding the question with a soundbite, what reassurances can the Chancellor give that we will break ground on any of the new RAAC replacement hospitals, and specifically Hinchingbrooke hospital in my constituency of Huntington during this Parliament?
Rachel Reeves
The hon. Gentleman should blame the previous Government for not funding the commitments that they made. My right hon. Friend the Secretary of State for Health and Social Care will meet all the people affected, including those affected by hospitals with RAAC problems, as soon as possible. As a Leeds MP, I recognise the importance of new hospitals and ensuring that our hospital estate is fit for purpose, but we cannot spend money that we do not have.
Mark Ferguson (Gateshead Central and Whickham) (Lab)
The shadow Chancellor said the books were open and that the Office for Budget Responsibility had audited the Government’s figures shortly before the election. However, the chair of the OBR has today published a letter confirming he intends to launch a review into the preparation of the March forecasts, stating:
“We were made aware of the extent of these pressures at a meeting with the Treasury last week.”
I am only new here; perhaps the Chancellor can inform me how to get the shadow Chancellor to correct the record?
Rachel Reeves
The OBR has just published a letter, as my hon. Friend said, which states:
“We were made aware of the extent of these pressures at a meeting with the Treasury last week”,
and goes on to state:
“If a significant fraction of these pressures is ultimately accommodated through higher DEL spending in 2024-25, this would constitute one of the largest year-ahead overspends against DEL forecasts outside of the pandemic years.”
This is incredibly serious. That is why I came to this House today to set out that £22 billion overspend compared with what the Government set out at the previous Budget. This letter from the chair of the Office for Budget Responsibility can leave no one in this Chamber in any doubt about the seriousness of the situation.
Dr Al Pinkerton (Surrey Heath) (LD)
I thank the Chancellor for her candour and her clarity today. There will be many residents and patients at Frimley Park hospital in my constituency—surrounded by a forest of acrow props holding up RAAC-riddled roofs—who will be deeply anxious at her announcement. Can she recommit to the Health Secretary’s commitment last week to prioritising spending, where possible, on those RAAC-affected hospitals and bring some comfort and clarity to the patients and the staff of Frimley Park hospital?
Rachel Reeves
I fully understand the hon. Gentleman’s concerns. I know that during the election campaign, like so many Members across the House, he will have campaigned in good faith, believing that the money was there. I can say in all candour today that the money was not there for this hospital programme. Although it is not my apology to make, I apologise on behalf of the Conservatives for the state of the public finances that they have left for us to sort out. My right hon. Friend the Health Secretary will meet the hon. Gentleman and everyone affected so that we can do whatever we can to make sure that we can get hospitals in the condition that his constituents, and so many of our constituents, rightly expect.
Ms Polly Billington (East Thanet) (Lab)
Will the Chancellor confirm that, despite the Conservatives’ failure to set aside money for transport commitments, Labour’s plan to modernise the network—vital for my community in East Thanet—will deliver a unified rail system that means we can deliver more for passengers and local communities?
Rachel Reeves
We have had to make difficult decisions today to cancel road and rail infrastructure projects. These are not decisions we wanted to make, but if the money is not there, we cannot go ahead with those projects. It is as simple as that. The money has to be there and the sums always have to add up, because I will not make the mistakes of the previous Government and Liz Truss, crashing the economy and sending interest rates and mortgage rates spiralling for our constituents. That is why I have had to take these actions today to get a grip on public spending and public finances. I make no apology for that, but I recognise the damage it does to so many constituents with projects that they had expected to see happening.
Sir Desmond Swayne (New Forest West) (Con)
When the Chancellor’s legislation enables illegal entrants to leave their current accommodation, where will they go?
Rachel Reeves
Under the previous Government, no applications were being processed and so nobody was being sent home. We will process those applications and send people who have no right to be here back home.
Jim Dickson (Dartford) (Lab)
I thank my right hon. Friend the Chancellor for her excellent statement, putting public finances and public services back on their feet. Having seen how extensive this Tory cover-up has been, with unfunded commitments in multiple Departments, does she agree that it is not just her predecessor as Chancellor, but every member of the last Cabinet who is complicit in that cover-up?
Rachel Reeves
I do not believe that any member of the previous Cabinet could not have been aware of the scale of this cover-up and the scale of the overspending. They should hang their heads in shame. Instead of coming to this Chamber today and issuing platitudes, they should have done the right thing and apologised to the country.
Greg Smith (Mid Buckinghamshire) (Con)
The Chancellor has made two key political decisions this afternoon: one, to fund extraordinarily high public sector pay increases; and two, to clobber pensioners to pay for it. Will she explain to the House and every pensioner who will lose their winter fuel allowance in the process why she did not challenge the Bank of England on the taxpayer bailouts that it requires, to the tune of tens of billions of pounds, to cover its losses from bond sales?
Rachel Reeves
First, it is an extraordinary omission that the previous Government did not set affordability criteria for the independent pay review bodies, which meant that they were able to come back with these recommendations. It would be almost without precedent not to accept recommendations from an independent pay review body. If the hon. Gentleman wants to go to the doctors, nurses, teachers, police officers and those in the armed forces in his constituency and say that they do not deserve a pay increase in line with private sector wages, that is up to him, but I believe that those public sector workers deserve those pay increases.
On pensions and the winter fuel payment, this is not the decision I wanted to make and it is not the decision I expected to make, but we have to make in-year savings, which is incredibly difficult to do. Without doing that, we would put our public finances at risk. We are ensuring that everybody who is entitled to pension credit—the poorest pensioners—continue to get the winter fuel payment, and we will work with the Department for Work and Pensions, local authorities and charities to boost the take-up of pension credit.
Rachael Maskell (York Central) (Lab/Co-op)
Thank you, Madam Deputy Speaker, and welcome to your place.
I thank my right hon. Friend for her forensic approach to the nation’s finances. As she digs deeper, she will see that York, the city I represent, is at the bottom of many of the matrices for the funding formulas. Will she look at the funding formulas before the Budget so that we can see the distribution of funding? The last Government handed out, for pet projects, much of the money that she is trying to get control of now, but will she look at how that is distributed across the country?
Rachel Reeves
I know, particularly around flood defences, that there are many great needs in the York constituency that my hon. Friend represents. These decisions will all be made at the time of the spending review.
Josh Babarinde (Eastbourne) (LD)
Residents of Eastbourne will be outraged to learn that the Conservatives’ promise of a brand-new hospital for our town was not worth the paper it was written on. Eastbourne deserves better. Under-investment has consequences and, at the moment, Eastbourne district general hospital is closed for births due to that under-investment, and it has been since December. It needs investment. Will the Chancellor confirm that her Government will invest in midwives, doctors and nurses, as well as hospital buildings, to protect local services there and across the country?
Rachel Reeves
I can see, on behalf of the hon. Gentleman’s constituents, the frustration and anger that he feels at the previous Government letting his constituents down so badly by not funding the hospitals that they promised. I commit to my right hon. Friend the Health Secretary meeting everybody affected. We also have a workforce plan, to invest in the future workforce in our national health service, and we are announcing today that we are accepting in full the recommendations of the independent pay review bodies to pay properly our doctors, nurses and others who work in our NHS.
Torsten Bell (Swansea West) (Lab)
Congratulations on your new post, Madam Deputy Speaker.
There can be reasonable political debate across the House about the total levels of public spending—there was a lot of that during the election campaign, with our calling for higher levels of public investment—but there should be complete agreement about the need for the Treasury to ensure that public money is well spent. At the top of that is making sure that the policies and commitments of every Department match their budgets. We hear from experts right around the country today that they do not match those budgets, so can the Chancellor reassure this ex-Treasury official, this House and my Swansea constituents that this will never happen under this Labour Government?
Rachel Reeves
I thank my hon. Friend for that question and welcome him to his place in this House—he speaks powerfully, based on his previous experience. I will fix the mess that we have inherited, but it is a terrible mess: a £22 billion in-year gap between what was forecast to be spent and what was actually being spent by the previous Government. We will get a grip on our public finances; that requires tough choices, but that is the role of Chancellor, and it is the role of Government. These are choices that the previous Government ducked and diverted, but we will make the difficult decisions to get our public finances back on a firmer footing.
Madam Deputy Speaker (Caroline Nokes)
We could do with some masterclasses in short questions and short answers.
Nick Timothy (West Suffolk) (Con)
Earlier, the Chancellor quoted Paul Johnson of the Institute for Fiscal Studies, but she omitted the end of his comments. He said that half of the spending hole she claims is public sector pay
“over which govt made a choice”.
That is the truth, is it not? The Chancellor does a good shocked face, but she chose to create her own spending hole, did she not?
Rachel Reeves
It was the previous Government who set the mandate for the pay review bodies. It is extraordinary that they did not include in that remit a measure of affordability, but they did not, which is why the pay review bodies made these recommendations. The previous Education Secretary could have rejected those recommendations, but she let them sit on her desk, because the previous Government were not willing to make tough decisions. We have made those decisions, including making sure that a third of the cost of these pay awards is absorbed, but there is a cost to inaction: last year, there was a £1.7 billion cost to the NHS alone because of industrial action.
Derek Twigg (Widnes and Halewood) (Lab)
Under the previous Government, there was at least a £17 billion black hole in defence, and of course they had hollowed out the armed forces. However, it is a surprise to find out today that not enough money was set aside in reserve to fund all the military assistance needed for Ukraine. Would the Chancellor say a bit more about that?
Rachel Reeves
The problem that the previous Government got into was that every time they wanted to make a commitment, they said it would be paid for from the reserve. By the time I came into the Treasury on 5 July, that reserve had been spent three times over, because they put so many commitments into that reserve that they could not afford. That is the situation that we inherited, that is where the £22 billion black hole comes from, and that is why I am having to make difficult decisions today to get a grip on the public finances.
Paul Holmes (Hamble Valley) (Con)
The Chancellor spent the election campaign saying that she was going for growth through investing in infrastructure. Instead, she is cutting it, while funding inflation-busting pay deals and scrapping pension benefits for the worst-off. Does she agree that in the battle for the two faces of the Labour party, the face of tax rises, borrowing and boom and bust won, and the British people—hard-working people—will ultimately lose under her leadership?
Rachel Reeves
There is nothing pro-growth about making unfunded spending commitments. There is nothing pro-growth about a lack of respect for taxpayers’ money. We will continue to provide the winter fuel payment for the poorest pensioners, those in receipt of pension credit.
Gregor Poynton (Livingston) (Lab)
I thank the Chancellor for her statement today and for being straight with the public about the state of our finances—I know my constituents want a Government who tell it to them straight. Does she agree that ducking tough decisions and hiding bad news, as the Conservative party has done, just makes a bad situation even worse?
Rachel Reeves
The previous Government and the previous Chancellor should hang their heads in shame for the inheritance they have left for this Government to fix, but I will fix this mess: I will put our public finances and our public spending on a firmer footing. That is the responsible thing to do, and that is what I will do.
Pete Wishart (Perth and Kinross-shire) (SNP)
I welcome you to the Chair, Madam Deputy Speaker.
Everybody and their granny knew that there would be a multi-billion-pound black hole; only the Chancellor seemed to be deaf and blind to the situation. We knew that she would be here explaining the sheer scale of it, yet when we raised this issue during the election campaign, we were told that we were being misleading and that it was all mince. Well, we know now. Does cutting winter fuel payments to all pensioners not seem and feel like Tory austerity? What discussions has the Chancellor had with the Scottish Government, because as she will know, this is a devolved responsibility.
Rachel Reeves
My right hon. Friend the Chief Secretary to the Treasury briefed the Scottish Government today on these decisions. These decisions are necessary: it is not in the interests of the Scottish people to have unfunded commitments, and to put our public finances and reputation for economic stability at risk. These are not easy decisions—they are difficult decisions—but the fault for them lies with the previous Government. The hon. Gentleman claims that what I have announced today is austerity, when we have just given a pay rise to more than 2 million public sector workers—he does not know what he is talking about.
Katie White (Leeds North West) (Lab)
I thank my right hon. Friend for her clarity and candour. After 14 years of sluggish growth and low living standards, and then a cost of living crisis, how callous was it that the Tories went into the election asking for another five years in power with a manifesto of false hope, undeliverable promises and no mention of the numerous black holes that she has now uncovered? What will she do instead to offer my constituents some real hope?
Rachel Reeves
I thank my hon. Friend for that question; I am pleased to have her as a constituency neighbour in Leeds. She is absolutely right that the previous Government went into the election knowing that there was a £22 billion black hole. What did they do during that election? They made more unfunded spending commitments and more unfunded promises about tax that they knew they could not keep. That was deeply irresponsible. After all the damage that they have done, they should have come to the Chamber today and apologised.
Stuart Anderson (South Shropshire) (Con)
Would the Chancellor confirm that all the information presented today was not known to her before last Thursday, when the estimates were laid?
Rachel Reeves
When I arrived at the Treasury three weeks ago, I asked Treasury officials to do a full analysis. We concluded that analysis over the weekend and I am publishing it today for the House of Commons.
Natasha Irons (Croydon East) (Lab)
I thank the Chancellor for the urgent update. With living standards now worse than when the previous Government took office, people across the country continue to suffer the consequences of their broken promises and mismanagement, but this final fiscal mic drop is truly shocking. Does she agree that, in contrast to the unfunded fantasy promises put forward by the Conservative party, Labour’s manifesto showed cast-iron discipline in being fully costed?
Rachel Reeves
I thank my hon. Friend for the question. Everything in Labour’s manifesto was fully costed and fully funded. We now know that on top of the £22-billion black hole that the previous Government left, they made unfunded commitments during the election. That was deeply irresponsible and the country was right to reject them.
Mr Peter Bedford (Mid Leicestershire) (Con)
Does the Chancellor think that one of her first decisions to cancel infrastructure projects is consistent with her desire to grow the economy?
Rachel Reeves
There is nothing pro-growth about making commitments that we cannot afford. There is nothing pro-growth about having £22 billion of unfunded commitments. We saw that when Liz Truss did her mini-Budget less than two years ago, and right hon. and hon. Opposition Members would do well to learn that lesson.
Rachel Reeves
I thank my hon. Friend for raising this issue. I will ask my right hon. Friend the Transport Secretary to meet him and discuss it further.
Ben Lake (Ceredigion Preseli) (PC)
I am grateful for the Chancellor’s clarity on the state of the public finances and for confirming that the Government will accept the recommendations of the independent pay review bodies. She explained that doing so incurs an additional in-year cost of £9 billion and that Departments will be tasked with finding savings of up to £3 billion. Can she outline whether she anticipates that they will have to cover the entire cost of the pay review bodies’ recommendations, or does she anticipate that the Treasury will need to make additional funds available to make up the shortfall?
Rachel Reeves
I thank the hon. Gentleman for the question. We have asked Departments to absorb £3.2 billion of the pressures, but it will be different in different Departments. We know that in the Department of Health and Social Care and the Department for Education, for example, it will be harder to absorb those pay pressures, given the huge challenges that they face. It will be different in different Departments, as we will set out in written ministerial statements by the relevant Secretaries of State.
Dr Zubir Ahmed (Glasgow South West) (Lab)
I thank my right hon. Friend the Chancellor for coming to this House and outlining the difficult decisions she has had to take on behalf of us all—decisions that she would not have had to take were it not for the opaque fiscal negligence of the Conservative party. Can she reassure me that a Labour Government will always protect the vulnerable, and that under a Labour Government pensioners in this country will still be over £1,600 better off per year by the end of this Parliament?
Rachel Reeves
I thank my hon. Friend for that question. We were determined to protect the most vulnerable, which is why we made the decision to ensure that the winter fuel payment would still be paid to the poorest pensioners on pension credit. More than that, we will work with local government and charities to increase the take-up of pension credit, so that everybody who deserves pension credit gets it, and with it the winter fuel payment.
Alicia Kearns (Rutland and Stamford) (Con)
We all remember Gordon Brown’s raid on pensions. It has taken just three weeks for Labour to revert to type, and it is pensioners who are suffering most. Martin Lewis has already criticised the decision online. On the estimates, the right hon. Lady cannot claim that, when permanent secretaries were signing off these estimates—over the weekend, I assume—they did not know about these supposed holes, but if that is so and they did sign them off with holes in them, that would be a breach of their legal duties. So will she be investigating them, or will she be apologising to them for throwing them under the bus today?
Rachel Reeves
Instead of blaming civil servants, the hon. Lady should blame the people who are really responsible, and that is the previous Government. The country did the right thing by kicking them out three weeks ago. They deserve never to get their hands on power again.
Ian Lavery (Blyth and Ashington) (Lab)
During the last Parliament, the Government paid substantial amounts to the train operating companies to make good their losses during a prolonged period of industrial dispute, causing mayhem and causing chaos to the general public. At the same time, the train operating companies paid huge dividends and they also paid their executives massive increases in bonuses. Can my right hon. Friend say how much this actually cost the British taxpayer, and can she ensure that this never ever happens again?
Rachel Reeves
Yes, page 5 of the “Fixing the foundations” document that we have published today sets out the pressures on public spending. On rail services:
“Pressures have emerged on rail finances, primarily due to the weaker-than-expected recovery in passenger demand”,
as well as the cost of industrial action, have led
“to a pressure of £1.6 billion”
in this financial year alone.
Christine Jardine (Edinburgh West) (LD)
I would also like to welcome you to the Chair, Madame Deputy Speaker.
Much of what the Chancellor says I welcome—no fresh income tax, national insurance or VAT—but I am sure the Chancellor will recognise the concern that many pensioners, particularly in the coldest areas of the country, will be feeling at the announcement of the withdrawal of winter fuel payments. Although she is saying that she will work on bringing more people forward and encouraging them to sign up for credits, can she tell us how she is going to do that if she is also going to cut the Government communications budget?
Rachel Reeves
I think the hon. Lady for that question. There are a couple of things we are committed to do. First, pension credit and housing benefit are due to be amalgamated. The previous Government put that back; we will bring that forward. We know that take-up of pension credit will increase when it is merged with housing benefit. That will make an impact in ensuring that people get the money they are entitled to. However, we have also committed, as elderly people’s charities have asked, to central Government working with local government to better identify people who are entitled to pension credit, but are not claiming it today. We want to make sure that everyone who is entitled to pension credit gets it, and with it the associated winter fuel payment.
Johanna Baxter (Paisley and Renfrewshire South) (Lab)
Does my right hon. Friend agree that one of the key failures of the Conservative Government over the past 14 years was their failure to grow the economy, and that that lack of growth meant they simply did not have the money to do the things that they none the less committed to voters in this country to do? That is why we should take no lessons on trust and credibility from the Conservative party.
Rachel Reeves
If our economy had grown at just the average rate for OECD economies over the past 14 years, it would today be worth £140 billion more. That would have been worth £5,000 for every family in Britain and would have meant an additional £58 billion for our public services, without increasing tax by a single penny. That shows how important economic growth is, which is why getting our economy growing is the No. 1 mission of this Government.
David Simmonds (Ruislip, Northwood and Pinner) (Con)
Thank you and welcome to your place, Madam Deputy Speaker.
The estimates day provisions presented by the Chancellor to the House last week included a capital departmental expenditure limit of £12.655 billion for the Department of Health and Social Care. We know that it included the funds for the new Hillingdon hospital, which was granted planning permission and where work has already started. Does the Chancellor of the Exchequer stand by what she told the House in the estimates day debate, on which we all relied when casting our vote? Can she therefore assure my constituents that that hospital project, which was fully budgeted for and where work has already started, will be delivered by this Government?
Rachel Reeves
As the hon. Gentleman knows, estimates have to be published to ensure that Government funding continues, so we had to publish those main estimates, but we will be presenting new estimates to the House based on the revelations that we have set out today.
Luke Murphy (Basingstoke) (Lab)
Can I express the anger that many of my constituents will be feeling, not just about the economic mismanagement and the litany of broken promises from the Conservative party, but about the complete failure to be transparent both with them and with the British public at large? What does the Chancellor have to say to the Conservative party about the way it behaved in office?
Rachel Reeves
We have now been in the Chamber for one hour and 40 minutes, but we have not had a single apology from any Opposition Members. They should have come to the Chamber today and apologised; they have not done so. The country kicked them out of office three and a half weeks ago, and we can tell why.
Lucy Rigby (Northampton North) (Lab)
May I point out to certain Opposition Members who might question the difficult decision that the Chancellor has taken to restrict the winter fuel payment to those on pension credit that this approach has been put forward by the Conservatives and the Lib Dems in recent manifestos? The Scottish Government’s own anti-poverty advisory body has stated that, as it stands,
“this particular instrument is extraordinarily poorly targeted as regards…addressing poverty.”
Does the Chancellor agree that although it is difficult, this decision is a sensible step towards fixing the huge Tory black hole in our public finances?
Rachel Reeves
None of the decisions that we have made today was easy. None of them was a decision that I wanted to have to make, but leaving unaddressed a £22 billion in-year hole in our public finances was not an option. We saw what happened when a previous Prime Minister and Chancellor played fast and loose with the public finances. I will not do that, which is why today I have been honest with this House about the scale of the inheritance that we now have to deal with and the necessary decisions, including on winter fuel payment, that I have had to take today.
Alberto Costa (South Leicestershire) (Con)
Richard Mitchell, the chief executive of the University Hospitals of Leicester NHS trust, emailed me only a few days ago asking for a meeting about the new hospital programme. Putting aside the politics, will the Chancellor help to arrange a meeting with Labour and Conservative MPs of Leicester and Leicestershire to discuss the matter alongside the chief executive of Leicestershire’s hospitals?
Rachel Reeves
My right hon. Friend the Health Secretary has agreed to meet all MPs affected and will, of course, also be talking to people who run our health service, to make sure that we can put right the mistakes made by the previous Government.
Anna Sabine (Frome and East Somerset) (LD)
Constituencies across the south-west, including my own, have waited years for final confirmation of plans to improve the A303 with a tunnel, a vital piece of infrastructure for our local communities and our regional economy. We now learn that, due to mismanagement of public finances by the previous Government, those plans are under severe threat. This is a hammer blow to our constituents, who have waited so long. Will the Chancellor meet me, my regional Lib Dem colleagues and the local communities who will be affected by this news?
Rachel Reeves
I understand the hon. Lady’s frustration and anger on behalf of her constituents that today we had to be honest about the scale of the inheritance we face. There was no money allocated for the A303 by the previous Government, despite their saying that it was going ahead. That is the state of affairs that we inherited. I am sure that my right hon. Friend the Transport Secretary would be happy to meet the hon. Lady and colleagues to discuss the matter.
Mr Jonathan Brash (Hartlepool) (Lab)
I thank my right hon. Friend for outlining the Conservative cover-up, for which they should apologise. One of the more shocking things to hear this afternoon is the repeated constant criticism of the idea of paying public sector workers properly. With the election of a Labour Government, are the days of scapegoating public sector workers when it comes to the public finances over?
Rachel Reeves
I know how hard our teachers, doctors, nurses, armed forces, police officers and prison guards work to keep us all safe, healthy and educated. They deserve the pay awards that we have announced today. It was the independent pay review bodies that recommended those pay increases. It would be extraordinary not to honour them, and we have done so today.
Robbie Moore (Keighley and Ilkley) (Con)
May I welcome you to the Chair, Madam Deputy Speaker? During the general election campaign, the now new Health Secretary and the local Labour party in Keighley and Ilkley told my constituents that they were fully committed to delivering the full rebuild of the Airedale hospital—one of those hospitals that struggles with aerated concrete—following my efforts to secure the full funds. With millions of pounds being spent on the project and works well under way, can I seek reassurance from the Chancellor that this new Labour Government will not deny my constituents their right to a full rebuild of Airedale hospital?
Rachel Reeves
The hon. Gentleman says he secured the funds, but he did not; the money was not there. That is why I am having to make this statement today. I share his frustration and anger, but it should be with the previous Government, who did not fund these schemes.
Jake Richards (Rother Valley) (Lab)
My constituents will be concerned about the revelations that the Chancellor has set out to the House this afternoon. Reading her statement, it is particularly shocking that the projected overspend on the asylum system, including the Conservatives’ failed Rwanda plan, will cost more than £6.4 billion this year alone. Does my right hon. Friend agree that instead of chuntering and shouting, a period of reflection would better serve the Conservatives, along with an apology to the country they have let down?
Rachel Reeves
My hon. Friend is right. The people of Rother Valley will be shocked and appalled by the gross mismanagement of public finances, including a £6.4 billion overspend on asylum. That is why we are getting a grip on the public finances and public spending to put them on a firmer footing.
Kit Malthouse (North West Hampshire) (Con)
I congratulate you on your ascension, Madam Deputy Speaker. The right hon. Lady says she is keen on transparency. Can she confirm to the House that she had extensive access talks with senior civil servants in the Treasury in the run-up to the general election? It might be helpful, for transparency purposes, if she could lay the minutes of those meetings in the House of Commons for the rest of the House to understand. I am also concerned about the issue of misleading estimates being laid before the House. May I suggest, for the elucidation of Members, that she asks the permanent secretary at the Treasury, and the permanent secretaries of those Departments impacted by the decisions she has made today, to confirm to the House in writing that none of the information that should have been in the estimates was not included—if they were correct, was it included?—so we can see for ourselves whether she is covering up?
Rachel Reeves
The cover-up was from those on the Opposition Benches. The sooner we get an apology to the British people, the better.
Deirdre Costigan (Ealing Southall) (Lab)
While the headline figures that the Chancellor has revealed are astonishing from an economic perspective, does she agree that it is important to remember the impact of Conservative mismanagement on our public services, our NHS, our education system and our national security? Indeed, how can the Conservatives be trusted to run our economy or our public services ever again?
Rachel Reeves
The response today from former Conservative Ministers just shows how deluded and out of touch they were. The British people delivered their verdict three weeks ago, and after the evidence they have seen today, they will understand that things are even worse than they had thought.
Clive Jones (Wokingham) (LD)
Welcome to your place, Madam Deputy Speaker. I wish the Chancellor well in reversing years of economic mismanagement by the previous Government. I really welcome the commitment to speak to MPs who are affected by the failure to provide 40 new hospitals, which were promised four and a half years ago. Patients and—just as importantly—staff at those hospitals will have been waiting for a long time. Will the Chancellor ensure that there is a decision soon so that the staff and patients do not have to wait another four and a half years to know what is happening with their hospitals?
Rachel Reeves
I share the hon. Gentleman’s frustration, anger and disappointment that the promises made by the previous Government turned out to be built on sand. The money simply was not there.
The decisions that we are having to take today are not easy. They are not the decisions that I want to make, but we have to put our public finances on a firmer footing. That is essential. My right hon. Friend the Health Secretary will meet the hon. Gentleman and others affected as soon as possible to talk through the next steps to ensure that all our constituents have the public services, including the hospitals, that they rightly deserve.
Oliver Ryan (Burnley) (Lab/Co-op)
The brass neck of Opposition Members is astonishing after what we have heard from the Chancellor today. My residents in Burnley, Padiham and Brierfield will be so disappointed to hear of the mismanagement over the last 14 years that she has uncovered in the Treasury—it was to be expected, anyway. Does she agree that the now shadow Chancellor should apologise and that, if he will not, he should resign?
Rachel Reeves
I find it staggering that in almost two hours in the Chamber, not a single Opposition Member has apologised for the state they left our public finances and public services in. It has fallen on this new Government to address that challenge. We will rise to that, but they should never have been left in this state.
Saqib Bhatti (Meriden and Solihull East) (Con)
I welcome you to the Chair, Madam Deputy Speaker. The Chancellor spoke about the need to lay the estimates. That is really important, and the legal duty is not just to lay them but for them to be accurate. The Chancellor is right that we have been here for nearly two hours, but we have not got an answer to the question of what she knew and when she knew it. Did she know any of the information that she has set out today before the estimates were laid? Please answer the question.
Rachel Reeves
I have done more in three and a half weeks to get a grip of our public finances than the previous Government did in 14 years. I have worked these last three and a half weeks to get a grip of the public finances and to understand the true extent and scale of the challenge. We have pulled this together over the last three weeks, and at the weekend we were able to produce the document showing the £22 billion gap between what the previous Government were spending and what they had budgeted for.
Leigh Ingham (Stafford) (Lab)
It is clear now that even the OBR, whose express purpose is to provide independent analysis of the public finances, was simply not told about the black hole in Conservative spending plans. What will the Chancellor do differently to ensure that we never end up in such a position again?
Rachel Reeves
I thank my hon. Friend for that question. In the letter that the Office for Budget Responsibility published this afternoon, the Chair said,
“I welcome the important actions announced today by HM Treasury to improve the transparency and credibility of their institutional arrangements for forecasting, planning, and controlling DEL.”
That is really important. By taking these actions, we will ensure that never again can any Government do what the Conservative party did: cause a £22 billion black hole in our public finances.
Gregory Stafford (Farnham and Bordon) (Con)
Residents in Farnham and Bordon will be concerned to hear about the scrapping of the new hospital programme, especially those living in the north of the constituency who are served by Frimley Park hospital. Will the Chancellor confirm that work on RAAC-affected hospitals, like Frimley Park, will still go ahead? Will she tell us when we can have assurance on that so that we can reassure our constituents?
Rachel Reeves
The hon. Gentleman’s constituents will be rightly angry with the previous Government for making unfunded spending commitments that they knew they could not pay for. My right hon. Friend the Health Secretary will meet all those with affected hospitals—including those affected by RAAC—to ensure that we can as quickly as possible address the challenges that his constituents and so many others now face because of the unfunded promises made by the previous Government.
Michael Payne (Gedling) (Lab)
May I congratulate you on your election, Madam Deputy Speaker? I thank the Chancellor for demonstrating today that she will always put country first and party second. The Conservative party’s response to its own failures is always to cover them up—from partygate to the state of our prisons, and now the black hole in our public finances that has been revealed today. What will my right hon. Friend do differently?
Rachel Reeves
We have already introduced legislation to Parliament for a new fiscal lock. We will publish a new charter for budget responsibility at the time of the Budget on 30 October. I have set out new institutional changes to the Office for Budget Responsibility to ensure that never again can a Government withhold information from this House, the country and the Office for Budget Responsibility.
Danny Kruger (East Wiltshire) (Con)
The Chancellor claims to have discovered a black hole in this year’s Budget, yet she is proposing to cut infrastructure investment for years to come. It makes no sense. One example is the Stonehenge tunnel, which was due to cost very little money this year, yet she has cancelled the whole thing. My constituents in Shrewton, Amesbury and all the villages around the A303 will be really disappointed to hear that news. What would she say to those residents? What will she do to relieve the traffic congestion that has blighted those communities for so long?
Rachel Reeves
The hon. Gentleman’s constituents will rightly be annoyed with the previous Government for saying that they would go ahead with the A303 work but not budgeting a single penny for it. That is where the responsibility lies for these failures and for the difficult announcements that I have had to make today.
Peter Swallow (Bracknell) (Lab)
Cash-strapped councils are projected to spend £12 billion to support children with special educational needs and disabilities by 2026. That is up from £4 billion a decade ago. Does the Chancellor agree that the Tories’ failure to get to grips with the SEN crisis has put public finances at risk while letting SEN children down?
Rachel Reeves
I think every single Member of the House will have faced often very difficult constituency casework about young people who are not getting a diagnosis on time and not getting the support they need at school. We will set out all our spending plans and priorities at the spending review later this year.
Wendy Chamberlain (North East Fife) (LD)
I welcome the Chancellor of the Exchequer and her team to their place. I am concerned that I have not seen anything in the Chancellor’s statement or the accompanying report on the 1950s women who suffered maladministration of their pensions. The Parliamentary and Health Service Ombudsman, which we all utilise when doing constituency casework, was clear that maladministration was suffered. Could the Chancellor confirm whether she is considering the report and will she provide a statement before the Budget on 30 October, or is the message to WASPI women today that she will not do it?
Rachel Reeves
My right hon. Friend the Work and Pensions Secretary is considering that report as we speak.
Catherine Atkinson (Derby North) (Lab)
For my constituents, this mess goes beyond money. It is about trust in politics. Does the Chancellor agree that the damage goes even deeper than the harm to our economy that she has set out?
Rachel Reeves
My hon. Friend is absolutely right. Today’s revelations of a £22 billion in-year overspend come on top of partygate and the handing of contracts to friends and donors to the Conservative party during the pandemic. That dents public trust. I have come to the House today to be open and transparent about the state of the public finances and the action that I will take to sort out this mess.
Dr Danny Chambers (Winchester) (LD)
Congratulations on your recent election, Madam Deputy Speaker. My training as a veterinary surgeon and my work in public health programmes around the world have taught me that it is always more cost-effective to keep people healthy rather than treat them when they get sick. Our hospital in Winchester is a good example, as 20% of people in the A&E department are there because they cannot get a GP appointment. People are there with tooth abscesses because they cannot get dentist appointments, and 30% are there with a mental health crisis and often are already on a waiting list. Does the Chancellor agree that when finances are so stretched, there must not be the temptation to view primary care as a cost to be cut, because investment in dentists, doctors, public health and mental health will make the NHS more efficient, and that will be better for patients and the taxpayer in the long run?
Rachel Reeves
The hon. Gentleman is absolutely right. The spending review will focus on both integration and prevention, because we know that that saves taxpayers’ money and delivers better outcomes for people.
Matt Turmaine (Watford) (Lab)
I congratulate you on your election, Madam Deputy Speaker. I thank the Chancellor for her candour in her statement to the House. My constituents will be bitterly disappointed by the consequences of the announcement made, in particular in relation to the rebuild of Watford hospital. It was promised under the last Labour Government and scrapped by the Conservative-Liberal Democrat coalition, and then promised again and again in the run-up to the general election, when the Conservative party said that the money was definitely there. Can the Chancellor tell me: where was the money?
Rachel Reeves
We have heard today that hon. and right hon. Members across the House campaigned in good faith on projects that they thought the money was there for. The money simply was not there. We cannot go on like that, which is why I have been open, transparent and honest about the state of our public finances and the £22 billion black hole left by the previous Government. The Secretary of State for Health and Social Care, my right hon. Friend the Member for Ilford North will meet my hon. Friend the Member for Watford (Matt Turmaine) and all MPs who are affected by the problems left by the previous Government.
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
Congratulations, Madam Deputy Speaker, on your new role. This Labour Government have chosen to take the winter fuel payment away from pensioners. The right hon. Lady does say she will keep it for those on pension credit, but the threshold for that is very low. That means someone on an income of just £220 a week may find themselves receiving nothing. It is long established that being cold increases ill health among vulnerable people. What estimate has she made of what her changes will cost the NHS?
Rachel Reeves
Pension credit is paid to a single person who has an income of just under £12,000 and for a pensioner couple of just under £18,000. We will indeed keep pension credit for the poorest pensioners and boost take-up of pension credit to ensure that everybody who is entitled to it gets it, but we cannot make promises—the previous Government should not have made promises—without being able to say where the money is going to come from. That is the road to ruin. We saw that with Liz Truss, and I am afraid it was repeated under the current Leader of the Opposition and the current shadow Chancellor. They should hang their heads in shame for what they have done to our public finances and our public services.
Mr Luke Charters (York Outer) (Lab)
The OBR chair’s letter referenced earlier suggests that we could now be facing one of the largest ever year-ahead expenditures outside of a pandemic. This level of cover-up would never be tolerated in the private sector. Does my right hon. Friend agree that this is exactly why my constituents deserve transparency about the state of the public finances?
Rachel Reeves
My hon. Friend speaks powerfully on behalf of his constituents in York Outer. They voted for change because they were sick and tired of unfunded commitments, broken public services and the deterioration in living standards after 14 years of Conservative Government. Today, they found the legacy the previous Government left is even worse than we could have anticipated, with a £22 billion black hole in the public finances.
Mr Gideon Amos (Taunton and Wellington) (LD)
I congratulate you on your post, Madam Deputy Speaker, and the right hon. Lady on her position as Chancellor. Does the Chancellor share the anger of the people of Taunton and Wellington in finding that not only is the whole new hospital promised by the Conservatives not funded, but that apparently, as we now discover, even the maternity unit might not be funded. On the restoring your railways programme, will the cancellation of projects also apply to those, such as Wellington station, which have already begun funding and have had GRIP—governance for railway investment projects—stage 4 approval?
Rachel Reeves
I can fully understand why the hon. Gentleman’s constituents are so angry with the previous Government for leaving this mess and making unfunded commitments. I assure him that projects that have already started, such as the station he mentions, will go ahead.
Jim Shannon (Strangford) (DUP)
Still the strongest legs in the Chamber, Madam Deputy Speaker. Thank you for calling me to ask a question.
I am very pleased to hear the Chancellor’s statement. The clear financial predicament is one that all the United Kingdom of Great Britain and Northern Ireland is in together. Will she confirm that, in light of the budget gap and the welcome announcement of the junior doctor pay offer, savings will be made in ways that do not affect required pay increases at the expense of our health staff, but that they will focus on cutting back on unnecessary quangos, on the estimated £500 million of taxpayers’ money that has been spent on issues such as diversity and inclusion—although important, they do not deserve priority in public spending—or on vanity projects such as Casement Park in Northern Ireland?
Rachel Reeves
I thank the hon. Gentleman for his questions, and for persevering for so long. I fully agree that the focus should be on frontline public services. We have committed ourselves to back-office efficiency savings of 2% in all Government Departments, and a reining in of consultancy and Government communications spending. Those things got out of hand under the last Government, and we will rein them in.
May I end by saying this? We have been here for two hours, and in that time not a single Conservative Member on either the Front Bench or the Back Benches has apologised for the state of the public finances and the state of our public services. That says all we need to know about the outgoing Conservative Government, and they should never have their hands on power again.
Paul Holmes
On a point of order, Madam Deputy Speaker. May I raise a significant issue that I am concerned about, in relation to the Chancellor’s statement? [Interruption.] The Chancellor obviously does not want to stay in the Chamber to hear this.
In the course of her remarks, the Chancellor appeared to indicate that the Government had knowingly laid wrong or misleading estimates before the House on Thursday last week which differed significantly from what she has presented today, one working day since those estimates were laid. This, if true, is of serious concern. What steps can we take to ensure that the Government retract either the estimates laid or the document that they produced today, and can you tell me whether this possibly constitutes a breach of the ministerial code?
Madam Deputy Speaker (Caroline Nokes)
The hon. Member will know that the Chair is not responsible for the content of contributions made by Ministers, but I am sure that his concern has been heard on the Government Benches. I am sure that if an error has been made in this instance, the Minister will seek to correct it as quickly as possible. It is for the Government to decide on the estimates that they put before the House.
Kit Malthouse
Further to that point of order, Madam Deputy Speaker. The Chancellor of the Exchequer made certain assertions about timing during her statement. However, we know from the media that the contents of the statement were briefed to The Guardian at 8.58 pm on Thursday, just after the estimates had been voted on. While I understand that the Chair is not responsible for the content of what is said at the Dispatch Box, the Chair is responsible for the integrity of documents that are laid before the House and on which we vote and rely. May I ask whether this is a matter for the Prime Minister in his governance of the ministerial code, or for the Commissioner for Standards in his upholding of standards in the House? Prima facie, in the absence of any evidence from the Chancellor, it looks as if we have all been misled.
Madam Deputy Speaker
The right hon. Member will know as well as I do that that is not for the Chair to decide. It is for the Government to decide what they put in their estimates and in documents that are published.