Rachel Reeves is set to reveal a staggering deficit in the public finances of up to £20billion, working up to a significant tax hike this autumn.
The Labour Chancellor will attribute the funding shortfall to mounting pressures on the NHS, prisons and schools.
An early assessment has highlighted £19bn in ‘excess pressures’ for the 2024-25 fiscal year, partly due to anticipated inflation-busting public sector wage increases, The Telegraph and The Guardian reported.
This would signal imminent tax rises, a move long anticipated by policy experts.
While Labour has historically avoided detailing such challenges, the deficit figure is still fluid and could be reduced through efficiency savings or project delays.
Rachel Reeves (seen earlier this month) is set to reveal a staggering deficit in the public finances of up to £20billion, working up to a significant tax hike this autumn
The Chancellor is expected to implement tax increases up to £25bn this autumn to address the fiscal gap, despite Sir Keir Starmer’s election campaign pledges against raising income tax, national insurance or VAT
The audit’s findings will be presented in Parliament next Monday, with Ms Reeves announcing her first Budget date.
Her update will reveal ‘the true scale of the damage the Conservatives have done to the public finances’, a Labour source said.
The Chancellor is expected to implement tax increases up to £25bn this autumn to address the fiscal gap, despite Labour’s election campaign pledges against raising income tax, national insurance or VAT.
Concerns are also growing over potential raids on pensions or inheritance tax reliefs.
Businesses and individuals alike are bracing for the impact, as these changes could have wide-reaching economic consequences.
Ms Reeves said last week that she was ready to approve pay rises of up to 5.5 per cent for millions of public sector workers, despite inflation being at two per cent.
The proposed pay increases to state employees like nurses and teachers could cost about £3.5 billion more than had been budgeted.
Speaking at a meeting of G20 finance ministers in Brazil, Ms Reeves said: ‘I have always been honest about the scale of the challenge we face as an incoming Government, and let me be crystal clear: we will fix the mess we have inherited.’
