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Rachel Reeves will reveal There is a black hole of around £20 billion in the public finances, which means taxes may be about to rise.
this The Prime Minister will Listed are the results of a spending audit she ordered Treasury officials to produce.
The findings appear to confirm concerns raised during the campaign. Influential Institute for Fiscal Studies (IFS) He accused the major political parties of “remaining silent” and not addressing the real problems with public finances.
Asked this morning on BBC Radio 4’s Today programme whether the black hole was a surprise, IFS director Paul Johnson said: “I don’t think it’s credible at all. It shouldn’t be surprising that there’s a big problem here.”
He pointed to cuts in recent years and the fact that public sector pay has lagged behind the private sector as a sign that public services clearly need investment.
“The (Labour) manifesto says ‘no new taxes on working people’ and that means there can be no tax increases at all,” he warned.
Ms Reeves and Labour have spent much of the election campaign denying Tory claims that taxes would rise by around £2,000 per household, but now the Tories are likely to introduce a series of tax rises to fill the gap.
Council tax and capital gains tax, in particular, are thought to be the subject of tax increases after Labour refused to rule out raising them during the election.
Labour sources said Ms Reeves’ latest message would reveal the “true scale of the damage the Conservatives have done to the public finances”.
The chancellor attended a meeting of G20 finance ministers in Brazil, where she confirmed the announcement would be made next month.
But her Conservative predecessor, current shadow chancellor Jeremy Hunt, branded Reeves’ claims a “fabrication”.
He said: “Labour’s claims are a complete fabrication – the books have been open since the Office for Budget Responsibility was set up 14 years ago. They show the economy has turned the corner and the deficit is just a third of what Labour left it with – not this nonsense being peddled by the chancellor.
“The fact is she doesn’t want to make the hard decisions on pay, productivity or entitlement reform that would mean we live within our means and lay the foundation for tax increases.
“After Labour promised 50 times not to do this, they will find that trust in the new government will evaporate more quickly than they expect.”
Labour sources did not deny reports that an early review had found a shortfall of nearly £20bn a year between revenues and funding commitments, including in areas such as asylum and public sector wages.
The figure is also likely to change when departments’ spending commitments are reviewed before Ms Reeves makes her Commons statement.
No tax increases are expected to plug the gap in spending on essential public services before the autumn budget, which Ms Reeves will also announce on Monday.
Labour has ruled out abolishing income tax, VAT, national insurance and corporation tax, but may consider changes to capital gains tax or inheritance tax.
Asked about the black hole that emerged at a meeting of G20 finance ministers in Brazil, Ms Reeves said: “I will be making a statement to Parliament on Monday but I am always honest about the scale of the challenge we face as a new government and let me be clear: we will fix the mess we have inherited.”
A Labour source said: “On Monday the British public will finally see the true scale of the damage the Conservatives have done to the public finances.
“They’re spending taxpayers’ money like crazy because they know someone else has to pay for it.
“Now Labour needs to repair the foundations of our economy and that work has already begun.”
When delivering her audit, Ms Reeves is expected to claim Mr Hunt’s pre-election plan will require deep cuts to already cash-strapped public services.
The chancellor is widely expected to be forced to raise taxes in the budget to avoid the spending retrenchment implied by existing plans and meet its fiscal rule of falling debt as a share of gross domestic product within five years.
Ms Reeves will also respond to public sector pay proposals as the government faces the need to find money for above-inflation wage rises.
It has been reported that teachers and NHS staff could receive a 5.5% pay rise, which could cost around £3.5 billion more than budgeted.
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