Around 10 million pensioners will lose their winter fuel payments, under new plans announced by the chancellor.
Rachel Reeves said those not on pension credit or other means-tested benefits will not receive the payments from this year onwards.
Ms Reeves told Parliament she had to make “necessary and urgent decisions” because of “unfunded” and “undisclosed” overspends made by the previous government. Several major infrastructure projects have also been axed.
Shadow chancellor Jeremy Hunt called Labour’s claims “spurious”, claiming Conservatives were open about the public finances while in power.
Meanwhile, public sector pay recommendations have been accepted in full, meaning 5.5% rises for NHS workers and teachers, 6% for the armed forces, 5% for the prison service, and 4.75% for the police.
In addition, junior doctors have been offered a 22% pay rise over two years.
The pay deals will cost an additional £9bn, with two-thirds of this funded by central government, with a third expected to be found from savings within departments.
However, most of Ms Reeves’ announcement was focused on cuts because of what she said was a “£22bn hole in the public finances”.
Some economists, including the Office for Budget Responsibility (OBR) and the Institute for Fiscal Studies (IFS), appear to have backed some of Ms Reeves’ claims.
But her decisions have been called a “political choice” by economists and Conservative politicians.
The following spending projects have been scrapped:
- A plan to build a two-mile road tunnel close to Stonehenge. Its costs so far amount to £166m in the planning stage
- A plan for an A27 Arundel bypass in West Sussex. Estimated to cost at least £320m, this had been put on hold by the previous government until 2025
- Former Prime Minister Boris Johnson’s plan to build 40 new hospital in England by 2030 at an estimated cost of £22.2bn
- The Restoring Your Railway Fund – a scheme designed to reopen previously closed rail lines, for which £500m was allocated by the previous government
Ms Reeves also said that she would not go ahead with selling shares the government owns in NatWest to the public, as her predecessor had planned to do, as it “would not represent value for money”.
The Rwanda deportation scheme for illegal migrants has also been scrapped, as per the Labour manifesto.
Ms Reeves said the former government had committed to spending money it did not have and that it did not tell the OBR about this.
Ms Reeves said the unfunded overspend from the previous government included £6.4bn on the asylum system, including the Rwanda scheme, and £1.6bn in transport.
The OBR said in a letter published on Monday that it was “made aware of the extent of these pressures at a meeting with the Treasury last week”.
It said this could “constitute one of the largest year-ahead overspends against… forecasts outside of the pandemic years”.
As a result it is reviewing how it prepared its forecast for the March 2024 Budget and will assess “the adequacy of the information and the assurances provided to the OBR by the Treasury regarding departmental spending”.
Paul Johnson, director of the IFS, said the £6.4bn overspend on asylum this year was a “huge number” that “does genuinely appear to have been unfunded”.
However, he added that “half of [the] spending ‘hole’ is public pay over which government made a choice and where pressures were known”.
Shadow chancellor Jeremy Hunt said Ms Reeves’ claims were “spurious”, accusing the government of deceiving the public on tax rises.
“Taxes will have to go up, and she chose not to tell us,” he said, adding that Ms Reeves’ first budget will be the “biggest betrayal in history by a new chancellor”.
Labour has previously said it will not borrow to fund “day-to-day costs”, which means it would only pay for things using the money it has already raised from tax.
However, Labour has also previously said it could borrow to invest, leaving it some wiggle room on projects like HS2.
During the election campaign, the Conservatives made similar commitments on tax and spending.
Economists said at the time both parties would either need to cut spending or raise taxes under their self-imposed fiscal rules.
