British public warned of $28bn financial black hole
UK public spending is on track to go £22 billion ($28 billion) over budget by this year due to Tory financial mismanagement, the new Chancellor of the Exchequer, Rachel Reeves, told parliament on Monday.
Reeves took over as finance chief after Labour won a landslide victory in the general election in early July, ending 14 years of Conservative Party rule.
Warning of the need to make “difficult decisions,” the chancellor announced an immediate £5.5 billion ($7 billion) of cuts, promising a further £8.1 billion ($10.4 billion) spending decrease for the next financial year. Reeves also announced above-inflation pay rises for public sector workers costing some £9.1 billion ($11.7 billion). Tory policies had sparked worker strikes in several areas of the public sector for years.
“They ducked the difficult decisions. They put party before country. The reserve spent more than three times over, only three months into the financial year, and they told no one,” Reeves said in the House of Commons. “The scale of this overspend is not sustainable. Not to act is simply not an option,” she added.
Reeves’ Conservative predecessor Jeremy Hunt has accused the new chancellor of laying the groundwork for breaking her pre-election promises and raising taxes.
“Today’s exercise is not economic, it’s political. She wants to blame the last Conservative government for tax rises and project cancellations she has been planning all along,” Hunt has said.
The new Labour government inherited a UK economy with stagnant growth and the highest level of public sector net debt since the early 1960s. The country’s ratio of public sector net debt to gross domestic product (GDP) was estimated to be at 99.5% in late June, according to the Office of National Statistics bulletin. GDP is expected to grow by 0.7% this year, according to the International Monetary Fund’s July economic outlook update.
