The current chancellor, Rachel Reeves, has accused her predecessor, Jeremy Hunt, of lying about the state of the public finances inherited by the Labour government. Hunt has dismissed these claims as “absolute nonsense”. The row stems from an audit conducted by the Treasury which identified £35bn of potential overspending by Whitehall departments in the 2024-25 financial year. Reeves has reduced this figure to £16.4bn by announcing £5.5bn in spending cuts. She claims that the previous government made spending commitments without allocating the funds to cover them, accusing Hunt of covering up the true state of the public finances.
Hunt, on the other hand, argues that Reeves is using the £21.9bn “black hole” as a smokescreen for tax increases that were always planned. He points out that Reeves had access to civil servants before the election and should have been aware of the state of the public finances. However, recent revelations from the Office for Budget Responsibility (OBR) suggest that the situation may be more complex than initially thought. The OBR has launched an inquiry into how departmental spending totals for 2024-25 were prepared and only recently became aware of the additional spending pressures.
The upcoming budget on 30 October will require tough decisions to address the remaining £16.4bn gap in departmental spending. Public spending totals for the next financial year appear tight, and taxes are likely to increase. Both Hunt and Reeves are attempting to shape the narrative surrounding the state of the public finances, knowing that the impression left with voters will have lasting repercussions. Ultimately, the government will be forced to make difficult choices to address the financial challenges ahead.
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