Labour accuse Tories of 'covering up' state of public finances

She will also move to delay a string of key hospital building and road schemes announced by Rishi Sunak’s administration.

It follows an audit of public spending ordered when she moved into No 11.

READ MORE: Reeves: Cutting child poverty in 'our DNA' but can't lift benefit cap

However, the SNP has questioned the claim that the spending pressures are unexpected, saying they and others, including the Institute for Fiscal Studies, warned of the strain on the public purse during the election.

They also pointed out that at the time Labour accused them of “peddling mince.”

Speaking on Sky News’s Sunday with Trevor Phillips, the environment secretary, Steve Reed, insisted that despite the Office for Budget Responsibility (OBR) publishing data on public finances twice a year, the government was only now discovering just how “catastrophic” their inheritance is.

“Well there are things outside of what the OBR are covering,” he said.

“It’s not only that we didn’t know, the prime minister deliberately covered it up. They covered it up,” the minister added.

He then pointed to the real cost of the Rwanda scheme.

He said the Tories said they had spent £400m to send four volunteers to Rwanda, but Labour say they have just found out they actually spent £700m.

The cabinet minister added: “We want to get away from the politics of denial and cover-up.

READ MORE: SNP demand apology from Labour for 'misleading voters' over cuts

One of the big surprises for the new government is that public sector pay deals are likely to cost a lot more than expected.

Ms Revees is expected to confirm teachers and some 1.3 million NHS staff will be in line for a 5.5% pay boost, about £3.5 billion more than had been budgeted for.

Economists believe this could rise to about £10 billion if other pay review bodies give similar advice on workforces such as police and prisons officers and doctors and dentists.

Depending on how this is paid for, it could lead to more money for the Scottish Government, who would almost certainly look to use it to fund pay hikes for workers north of the border, and see off looming industrial action.

If the Chancellor borrows to fund the increase, there will be consequentials, but if Ms Reeves simply moves money between departments there there will be little additional cash for John Swinney.

Ms Reeves has a set of self-imposed fiscal rules, including a commitment to have debt fall as a share of gross domestic product in five years’ time.

The IFS suggests that to pay for the wage rise the Chancellor will need to tweak that rule or look at tax increases.

Labour has ruled out lifting income tax, VAT, national insurance and corporation tax, potentially leaving changes to pensions relief and capital gains and inheritance levies on the table.

Commenting, SNP Economy spokesperson Dave Doogan said: “The SNP repeatedly warned the Labour Party that their fixation with copying damaging Tory spending plans and fiscal rules would mean around £18billion of cuts or tax rises.

“Labour denied it throughout the election - but now they admit the cuts will be even deeper.

“Rachel Reeves is repeating the same failed austerity arguments made by former Tory chancellor George Osborne. She must not break the Labour Party’s election promise that there will be no cuts. Instead, she must deliver the major funding boost that the NHS and public services need.”

Speaking on BBC Scotland’s The Sunday Show, Labour MP for East Renfrewshire, Blair McDougall, said there would be no return to austerity.

"I think we’ve said in the election, and you’ll see from Rachel being clear about where it is we’re going to raise more money.”

He added: “I think Rachel deserves a lot of credit for trying to be honest with the public and saying exactly what the extent of the mess we’ve inherited is.

“People don’t think that things are going to be easy, they accept that change is going to take time but what they want to know is what is the direction of travel and how are we going to get there and the first step of that is about being honest.”

Mr McDougall was asked again to clarify whether there would be austerity under Labour. He said: “No. We are going to invest in public services. We’re going to raise people’s standards of living, that’s our whole mission.”

IFS director Paul Johnson said Labour “knew to a large degree how bad things” were with the public finances before entering government.

The thinktank boss said: “We and many others have made it very clear that it was going to be very hard to avoid cuts over the next few years given the proposals made by the previous government.

“I’ve no doubt they have discovered some specific issues, and particularly about how tough things are this year or immediately, which wouldn’t have been quite so evident from the public pronouncements.

“So my guess is that that’s what they’re going to focus on on Monday.”