Rachel Reeves has scrapped some winter fuel payments, along with a range of other government programmes and policies to plug a projected £22bn government spending overrun.
The Chancellor said those not receiving Pension Credit would no longer receive any extra cash, as she repeatedly told MPs: “If we can’t afford it, we can’t do it.”
The Chancellor also announced that reforms to adult social care charges, which were delayed by the previous government, would also not go ahead under the new government – a move that will save more than £1 billion by the end of next year.
In total, all departments have been asked to find savings worth an estimated £3bn, Ms Reeves said, while a number of projects – including Boris Johnson’s plan includes building 40 new hospitals and to restore old railway lines – will be revised or cancelled.
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The chancellor blamed her decisions on the previous government, accusing the Conservatives of “letting people down” by making “commitment after commitment without knowing where the money would come from”.
“Today I am exposing the Tories’ cover-up and taking the first steps to clean up what they left behind,” she said.
Rachel Reeves leaves 11 Downing Street. Photo: PA
“It’s political”
Shadow chancellor Jeremy Hunt, sitting opposite Ms Reeves in the House of Commons, immediately refuted her characterisation of the previous government, saying its legacy statement was “not economic, but political”.
“Today, she will fool absolutely no one with her shameless attempt to prepare the ground for tax increases that she did not have the courage to tell us about,” he said.
“She says the information is new, but she herself told the Financial Times: ‘You don’t need to win an election to know the state of the public finances because we now have the OBR (Office for Budget Responsibility)’.”
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Hunt: Chancellor’s argument ‘not credible’
Mr Hunt quoted economic expert Paul Johnson, of the Institute for Fiscal Studies, and said the state of the public finances “was obvious before the election to anyone who cared to look – which is why he and other independent figures say his argument is not credible and will not hold up”.
He added: “She wants to blame the last Conservative government for the tax hikes and the cancellations of projects that she has been planning all along.”
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Winter fuel payment is “necessary and urgent”
Ms Reeves said the decision to scrap winter fuel payments for some pensioners was a “difficult” decision she did not want to make.
“This level of excessive spending is not sustainable,” she said.
“If nothing is done, it poses a risk to economic stability and, unlike the party opposite, I will never take risks with the economic stability of our country.”
Ms Reeves said that while the government would continue to protect the triple lock on pensions – the measure to increase state pensions each year by average earnings, inflation or 2.5% – she said those “who are not in receipt of Pension Credit or certain other means-tested benefits will no longer receive the winter fuel payment from this year”.
She said the government would, however, continue to provide winter fuel payments worth £200 to households in receipt of Pension Credit or £300 to households in receipt of Pension Credit with someone over the age of 80.
“I want to be clear: These are not decisions I wanted to make, nor were I expecting to make – but they are necessary and urgent decisions that I must make,” she said.
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Ms Reeves’ statement came after it was announced that Junior doctors offered 22.3% pay rise by the government to end the strike.
She said she would not repeat the Tories’ “mistakes” and would accept “in full” the recommendations of the independent pay review.
The measure will cost an extra £9bn this year.
Junior doctors on the picket line. Photo: PA
“The legacy is unforgivable”
In recent days, ministers have tried to suggest that the economy inherited from the Conservatives is worse than expected, despite claims by the Institute for Fiscal Studies think tank. warning about the poor state of public finances during the election campaign.
Ms Reeves said her government had “inherited a projected overspend of £22 billion”. The measures announced today reduce that figure to £16.4 billion, which will be addressed in the upcoming budget. will take place on October 30 this year and a multi-year review of spending.
Among the measures that have been scrapped to save money are several transport projects, including the Stonehenge tunnel on the A303, the Arundel bypass on the A27 and the Restoring Our Railways project.
Reforms to cap social care costs at £100,000 – first put forward by Sir Andrew Dilnot to David Cameron more than a decade ago – were eventually abandoned after years of indecision due to the £1 billion cost, which Ms Reeves said was never funded or affordable.
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“The legacy of the previous government is unforgivable,” the chancellor said.
“After the chaos of Partygate, when they knew that trust in politics was at an all-time low, they gave Britain false hope.
“When people were already affected by the cost of living crisis, they promised solutions that they knew could never be funded.
“Roads that would never be built. Public transportation that would never arrive. Hospitals that would never treat a single patient.”
She concluded: “They spent like there was no tomorrow, because they knew someone else would foot the bill, and then, in the election – and this is perhaps the most shocking part – they campaigned on a platform to do it all again.”
