All eyes are on the Treasury today, as UK chancellor Rachel Reeves prepares to issue an update on the state of the country’s public finances and what the Labour party has inherited from the former Tory government.
Reeves is expected to tell MPs that the Tories left a £20bn hole in government spending for essential public services.And a think tank has now said that the £20bn shortfall is equivalent to the Tories’ pre-election national insurance cuts.
Paul Johnson, director of the Institute for Fiscal Studies, told BBC Breakfast: "It is very striking that if this problem is about £20bn big, that is exactly the scale of the national insurance cuts implemented by Jeremy Hunt just before the election.
"Now, if those cuts were implemented in the knowledge that there was this kind of hole, that is not good policy, to put it mildly."
The Tory government announced 2p would be cut from national insurance in last year’s autumn statement, and announced a further 2p cut in this year’s spring budget.
The combined cuts were expected to save the average earner £900 a year.
However, the former government was said to have been been looking at further public spending cuts, had the Tories won last month’s election, as one way to pay for the tax reduction. That was despite economists’ warnings that such a move would cause public services to buckle.
Stay tuned as we look ahead to Reeves’s address, which is expected to lay the groundwork for tax rises, cuts to public spending and delays to some big infrastructure projects.
The agenda • 9:30am BST: UK mortgage approvals, net mortgage lending and consumer credit for June • 3:30pm BST: UK chancellor Rachel Reeves to set out state of public finances
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