Chancellor disingenuous over public finances claim

New Chancellor Rachel Reeves has made the entirely predictable claim that, now she has had an opportunity to “properly review” the state of the nation’s finances, things are worse than she feared. Surprise, surprise… despite stating repeatedly during the election campaign that she knew full well what she would be inheriting, many observers predicted that she would use the old “oh, things are worse than I thought” line to justify tax rises or spending cuts once her party had lied their way into power.

Of course, despite being repeatedly challenged on this by the Tories at the time, Labour did not want to own up to this before the election, for fear of losing votes. Indeed, prior to the election, Reeves admitted that, unlike previous incoming Chancellors, she would be unable to arrive at the Treasury and claim she had looked inside the books and realised things were even worse than she looked from the outside, giving a flimsy excuse for immediate tax rises or spending cuts. Reeves was quoted as saying:

“We’ve got the OBR now... We know things are in a pretty bad state, you don’t need to win an election to find that out.”

Given the OBR’s detailed and public scrutiny of public finances, providing Reeves with the most in-depth insight ever into what she would be inheriting, it is not credible for her to claim that a £20bn shortfall exists of which she was not sighted.

Reeves has decided that a Treasury audit of public finances would prove the ideal vehicle to make these disingenuous claims about “black holes” in the finances, believing that the public would be insufficiently educated on macro-economics to challenge her assertions. However, she has been called out by multiple economic experts and Treasury officials for her insincerity on the matter.

Of the £20bn that she claims represents the public finance “black hole”, it must also be noted that £10bn of this is attributable to the unfunded above-inflation pay rises that she has chosen to award to public sector workers. Whilst I have some sympathy for her position, given this aligns to the recommendations of the Pay Review Board, a body that the previous Government also relied on to base public sector pay awards, this nonetheless still represents the fallout of a choice that she has made as Chancellor, and not the economic position she inherited.

No-one has forced her to award inflation-busting pay rises to public sector workers. She could have said that the public finances don’t allow for implementation of the PRB’s recommendations. In agreeing to 5.5% wage rises for teachers and NHS staff, she has added to the problem and is now trying to pass it off as a legacy of the outgoing Tory Government.

It simply does not wash, especially when in the past week her Labour Government has committed a further £3bn to support the war in Ukraine, and Labour Energy Minister Ed Milliband has pledged an astonishing £11.6bn in overseas aid to other countries to help with the impacts of climate change.