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Rachel Reeves will make a statement to parliament on Monday promising “honesty” about the scale of the financial challenge facing the new Labour government.
This is not a new policy or new borrowing forecast.
Instead, Treasury officials have been scrutinising departmental plans to uncover unexpected costs and implicit cuts to public services under spending plans inherited from the previous government.
Publishing a detailed report on the pressures on public spending is risky. It will be an important test for the new chancellor.
When she stands up and tells MPs she has discovered billions of pounds of unforeseen spending, many will have questions.
Are these pressures really unexpected? Were they saved from the previous government’s archive shredders?
The first task of a new chancellor is to gain credibility with investors and voters. Everything a finance minister achieves economically is facilitated by this trust.
But recent years have shown that credibility is hard to earn and much easier to lose.
Losing it makes even the simplest policies difficult.
Reeves has gone to great lengths to prevent any future government from sidelining the UK’s independent forecaster to assess its economic plans, as former Prime Minister Liz Truss did for her short-lived mini-budget.
Indeed, it proposes to legislate to give powers to the Office for Budget Responsibility (OBR) to make judgments on any major tax or spending announcements.
The OBR is not involved in Monday’s process, but we may hear from them after the event.
In previous reports, the government has suggested that it has regularly miscalculated borrowing in its official forecasts because it has underestimated departmental spending.
Last year, it specifically highlighted its legal obligation to condition its forecasts on “declared government policies”, even when they were considered unrealistic.
In March, for example, the OBR said that real spending per head in the UK was likely to be 8% lower in 2027 than originally forecast in the last spending review, which detailed government departments’ public spending plans.
The question on Monday will be whether Reeves has detailed evidence of what this means in practice.
Home Secretary Yvette Cooper has already said that the now-abandoned Conservative Rwanda Bill cost £700m. In areas not protected from cuts, the civil service is said to have worked out scenarios for the impact of real cuts to prisons, courts, universities, colleges and councils, including social services for adults and children.
The new government seems to suggest that the huge expenditure required for basic public services leaves little room for choice. Municipalities, for example, spend most of their budgets on services they are legally required to provide.
It is not surprising that spending in some areas has been cut sharply.
But are the public sector wage recommendations, which are about 3% higher than current spending plans, really such a surprise? In any case, it is still up to the government to decide whether to accept and fund them.
In almost all parliaments (except the last one), new governments have chosen to raise taxes in their first budgets. It appears that the plan presented Monday is part of a process that will lead to this decision in the fall.
The government has already ruled out increasing the tax rates responsible for 75% of tax revenues.
But the new chancellor will have to ensure that her staff find irrefutable evidence in the ministerial documents, or explain why all this was not clarified to voters before the election.
