There is one over-arching question hanging over Rachel Reeves’s speech today, in which she claimed that a £21.9 billion hole has opened up in the current political spending for this financial year: why, if there is such a large ‘black hole’ in the public finances, is there suddenly money available for £9.4 billion worth of above-inflation pay rises for public sector workers?
Preposterously, those pay rises – which Reeves has chosen to make and which were not committed to by the previous government – are included as one of the unfunded spending items (indeed the single biggest spending item) which has contributed to the ‘black hole’. Reeves justifies this leap of logic by claiming that she had no choice but to concede to the conclusions of the pay review bodies, which have recommended pay rises of 5.5 per cent for teachers and other workers. Not only has Reeves rolled over and decided to grant these – supposedly on the basis that public sector unions would call strikes and cost us even more money in the long run – but she has also nodded through a pay rise for junior doctors of over 20 per cent, spread over two years. That is not the act of a Chancellor who is genuinely surprised and shocked by the poor state of the public finances – rather it is the decision of one who wishes to curry favour with public sector unions – and is looking for an excuse to chop other budgets in order to try to pay for them.
The biggest item, after public sector pay, is asylum
As for possible tax rises, we won’t know them until the Budget on 30 October. But there are other unfunded spending items which supposedly lie in Reeves’ black hole and which now face being cut back. All, she says, have been identified in an emergency audit of government spending – and have been published in a document to accompany today’s announcement. The biggest item, after public sector pay, is asylum, which Reeves claims has incurred a cost overrun of £6.4 billion this year, mainly on account of the numbers of asylum-seekers being higher than forecast. How Reeves thinks the previous government could have forecast the number of migrants arriving on small boats is hard to fathom, although many might say that it is highly likely to increase now that the government has abandoned the Rwanda scheme. The threat of being sent to Rwanda did at least appear to be acting as a deterrent to asylum-seekers making claims in Britain – as evidenced by the flight of some migrants from the United Kingdom to the Republic of Ireland. The basic cost of the Rwanda scheme, by the way, was put by the National Audit Office at £370 million, £270 million of which had already been paid to the Rwandan government. That is a relative drop in the ocean compared with the overall spend on asylum claims and serving the needs of claimants. It won’t take too much of an increase in asylum claims before the cost of the extra claims exceeds the money saved by scrapping the Rwanda scheme.
Reeves’ emergency audit also claims that there has been a £1.6 billion overspend on rail services. It also claims uncosted pressures of £3 billion this year on military aid for Ukraine – yet Labour is supposed to support this. It also claims £500 million worth of unfunded commitments to the Household Support Fund, £260 million to Rishi Sunak’s Advanced British Standard, which will now be dropped, and £250 million towards support for bus services. Reeves also announced that the winter fuel payment will not be paid this year to pensioners who are not on Pension Credit, said that road schemes including the Stonehenge tunnel and the A27 Arundel bypass would be cancelled. A suggestion by some that the already highly-truncated HS2 would be terminated at Old Oak Common did not form part of the announcements. Reeves did say, however, that the previous government’s commitment to 40 new hospitals will be reviewed, but did not suggest which projects would be in danger.
In short, NHS patients may have to continue to wait for treatment in crumbling hospitals – but at least they will know the doctors and nurses whom they are waiting to treat them are much better paid.
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