Chancellor may raise some taxes in the autumn due to what Labour describes as its ‘shocking inheritance’ from Tories
Rachel Reeves is expected to reveal a £20bn hole in government spending for essential public services on Monday, paving the way for potential tax rises in the autumn budget.
When Reeves sets out the findings of her Treasury audit on Monday, she will also announce the date of the spending review and the budget in October. Economists have predicted Reeves will “kitchen sink” the bad news about the economy, in an expected excoriation of the previous government’s record. The review is likely to conclude that existing spending plans are unsustainable and would require substantial cuts to public services, a position that economists had highlighted repeatedly before the election.
The former chancellor Jeremy Hunt is said to have believed that pay demands would have eaten all of the Conservative’s government fiscal headroom – one of the key reasons for Rishi Sunak calling an early election as it became clear there could be no promised tax cuts. He said in a report this week: “We suspect the Reeves review will conclude that a more realistic and sustainable outlook is likely to require a mix of higher public spending, greater headroom versus the fiscal rules and a more plausible path of fiscal tightening over the five-year forecast period.
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