How Rachel Reeves is planning cost-cutting steps to fix public finances

Chancellor Rachel Reeves will announce immediate steps to cut costs on Monday as she is expected to unveil a black hole in the accounts of around £20 billion.

She will lay out the spending inheritance left by the previous government – and announce the date of her first autumn Budget – on Monday afternoon as she pledges to “restore economic stability”.

She will say that a Treasury spending audit she commissioned shows that the previous government overspent this year’s budgets by billions of pounds after making a series of unfunded promises.

Chancellor Rachel Reeves will set up steps to cut costs as she unveils a black hole in the accounts of around £20 billion. Photo: Christopher Furlong/Getty Images

She will also accuse the previous Conservative government of “covering up the true state of the public finances”.

A new Office of Value for Money, a Labour manifesto pledge, will start work right away to identify and recommend areas where the Government can save money in the current financial year, she will say.

The office will also seek to stop spending which is poor value for money before it begins.

Ms Reeves will announce reforms that target waste in the public sector and aim to make government departments more efficient.

She will also stop non-essential spending on consultants, dispose of surplus estates and speed up the delivery of administrative efficiencies in departments.

The Chancellor is expected to tell the House of Commons: “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.”

Labour has insisted it will not raise taxes on working people to fund its manifesto commitments and rely instead on economic growth.

At the same time, Ms Reeves and other ministers have repeatedly pointed to the public finances they inherited as being in a worse state than expected.

This has prompted questions about how they plan to deal with immediate cash flow issues.

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.

Ms Reeves is expected to say on Monday: “Before the election, I said we would face the worst inheritance since the Second World War.

“Taxes at a 70-year high. Debt through the roof. An economy only just coming out of recession. I knew all those things. I was honest about them during the election campaign. And the difficult choices it meant.

“But upon my arrival at the Treasury three weeks ago, it became clear that there were things I did not know. Things that the party opposite covered up from the country.”

The Chancellor is expected to approve above-inflation pay rises for millions of public sector workers in response to the recommendations of independent pay review bodies.