Rachel Reeves accuses Tories of £20 billion overspend

According to multiple reports, she will say there is a £20 billion black hole in the public finances and could look to make savings by cutting and delaying major infrastructure projects and by “driving efficiency through government departments."

READ MORE: Labour accuse Tories of 'covering up' state of public finances

However, the SNP has questioned the claim that this is unexpected, given that the Office for Budget Responsibility (OBR) publishes data on public finances twice a year.

They also pointed to an analysis by the Institute for Fiscal Studies in June, which warned of an £18bn gap because of Labour’s spending plans and adherence to strict fiscal rules, including a commitment to have debt fall as a share of gross domestic product in five years.

When the SNP raised this in the run-up to the July 4 vote, Labour accused them of “peddling mince.”

(Image: Jonathan Brady/PA)

In her speech today, the Chancellor will say that when she arrived at the Treasury, “it became clear that there were things I did not know. Things that the party opposite covered up from the country.”

Ms Reeves will add: “It is time to level with the public and tell them the truth. The previous government refused to take the difficult decisions.

"They covered up the true state of the public finances. And then they ran away. I will never do that.

"The British people voted for change and we will deliver that change.

"I will restore economic stability. I will never stand by and let this happen again. We will fix the foundations of our economy, so we can rebuild Britain and make every part of our country better off.”

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

Economists believe this could rise to about £10bn if other pay review bodies give similar advice on workforces such as police, prison officers, 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 will be little additional cash for John Swinney.

READ MORE: Council leaders to ask Scot Gov for more money to avoid bin strikes

Ms Reeves will also confirm that she has commissioned an Office for Budget Responsibility forecast to coincide with a Budget and Spending Review to be held later this year.

She will tell MPs that she is committing the new government to one major fiscal event per year and ruling out any “surprise budgets which have previously caused uncertainty for both the markets and family finances across the country.”

The Chancellor will also share details of the new Office of Value for Money, which the Treasury says will “put an end to wasteful spending in government, providing targeted scrutiny of public spending so that value for money governs every decision the government makes.”

This new body is to “immediately begin work on identifying and recommending savings for the current financial year, while also establishing where targeted reforms of the system can ensure that poor value for money spending is cut off before it begins.”

Ms Reeves will announce new reforms to tackle waste in the public sector by “driving efficiency through government departments and arms-length bodies.”

This will include ending non-essential spending on consultants, disposing of surplus estates, and hastening the delivery of admin efficiencies in departments.

Commenting ahead of the statement, SNP Westminster Leader Stephen Flynn said: “The SNP repeatedly warned the Labour Party’s damaging decision to copy Tory fiscal rules and spending plans would mean around £18bn of cuts or tax rises – and despite denying this throughout the election, Rachel Reeves has finally been forced to admit it’s true.

“People in Scotland will be openly questioning why, after being promised there would be no cuts, no tax rises, and no austerity, this new Labour government is choosing to dramatically break its promise within weeks of being elected."

(Image: Aaron Chown/PA)

The MP for Aberdeen South added: “The Labour Chancellor must not pull a George Osborne and starve our public services of much-needed cash. People in Scotland voted for change – but the Labour government is paving the way to cut and restrict funding to our NHS, public services, and vital infrastructure.”

READ MORE: IFS warns of cuts ahead regardless of election result

Asked on Sunday Morning with Trevor Phillips if he was embarrassed by the “black hole” that now exists in public finances, the Tory Shadow Paymaster General John Glen said: “I’m not embarrassed at all. Government is about taking tough choices across a balanced set of priorities.

“What we were trying to do was prioritize working people’s tax cuts as much as we possibly could whilst maintaining investment in the NHS, long-term workforce reform plans in the NHS for the first time in its history, and continue to invest in education and public services.

“What we also said in the election campaign is that we had a very rigorous campaign to actually get more efficiencies in our public services through welfare reform, getting the number of civil servants reduced, because it’s at a historic high, and actually bring reformed public services, and that is the area that this Government appears to have very, very little narrative on.

“What they’re just saying is, ‘tell us the maximum amount you want to spend and we’ll raise the taxes for you,’ something they explicitly ruled out 50 times during the election campaign.”