Chancellor announces plans to address unfunded spending following Treasury audit

Chancellor of the Exchequer, Rachel Reeves, has announced the need to address unfunded spending commitments of £22 billion revealed to have been made by the previous government in a Treasury audit.

Addressing the House of Commons on 29th July, Rachel Reeves outlined that a number of financial commitments inherited from her predecessor had been unfunded, and announced a commitment to make £5.5 billion in savings this year, and £8.1 billion next year to address the overspend. She also announced that her first Budget as Chancellor, alongside a Spending Review, would come on 30th October.

Among cuts to public spending announced already, around £1.5 billion in savings will come from restricting the Winter Fuel Payments to pensioners to only those receiving Pension Credit or other benefits. £800 million this year and £1.4 billion next year is being saved by scrapping the Rwanda migration project, while a further £4 billion through to the end of the decade will come from not moving ahead with the previous government’s unfunded adult social care charging reforms.

Plans to reform A level and T level qualifications into the Advanced British Standard were also found by the Treasury audit to be unfunded and have also been scrapped.

Some infrastructure projects have also been withdrawn as part of the cuts, including major road projects proposed for the A303 and A27 in the South of England, and projects yet to start construction via the Restoring Your Railways Fund will also be halted. The government’s New Hospital Programme, which had been feted to deliver 40 new hospitals across the country, has also been axed given its underdelivery, with work only starting at six sites: the loss of this funding stream will be a blow to plans in Stockport, where a bid had been submitted for a new town centre hospital on the site of the former Debenhams store and Heaton Lane car park.

The previous Government also failed to increase Departmental budgets to cover public sector pay settlements, which were £11-12 billion higher than accounted for at the last Spending review. Despite this, the Chancellor will move forward with public sector pay rises as recommended, including a 5.5% increase for schoolteachers. A settlement for Junior Doctors will also go to a vote which the BMA has recommended its members accept, ending long-running industrial action in the NHS.

The Chancellor also announced some plans to increase revenue for the Treasury alongside spending cuts, including the end to VAT breaks on private schools, replacing the non-domicile regime with a residence-based system, and further extension of the Energy Profits Levy, which will be at an increased rate of 38% from 1st November. A new Office of Value for Money will also be launched to explore ways to address falling productivity in the public sector.

Chancellor of the Exchequer, Rachel Reeves said of her announcements:  

“This is not the statement I wanted to give today, and these are not the decisions I wanted to make. But they are the right decisions in difficult circumstances.”