The new British government will take harsh measures to solve one of the UK’s most pressing issues.
The United Kingdom is in deep financial trouble with a £22 billion “black hole” in public finances that needs to be fixed urgently. The UK’s Finance Minister Rachel Reeves revealed the full picture of state coffins on Monday, announcing immediate cuts in public services.
Reeves pointed the finger at the previous UK government, accusing them of hiding the full picture of British finances ahead of the election. The Conservative Party, which lost its worst election in history on July 4th, ran on a campaign of tax cuts and public spending.
In turn, former Finance Minister Jeremy Hunt claimed the Labour Party had full knowledge of the “black hole” and chose not to reveal it.
According to the Institute for Fiscal Studies, an economic think tank, both parties were aware of the state of British finances. The IFS called it a “conspiracy of silence” to avoid losing votes for their parties.
“It was always clear and obvious that the spending plans [Rachel Reeves] inherited were incompatible with Labour’s ambitions for public services, and that more cash would be required eventually,” Paul Johnson, director of the IFS, told the Associated Press.
“But the extent of the in-year funding pressures does genuinely appear to be greater than could be discerned from the outside, which only adds to the scale of the problem.”
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The scale of the problem
According to Reeves, the £22 billion hole was caused by several spending commitments the previous government took.
Most notably, £6.4 billion funded the unsuccessful plan to send immigrants to Rwanda, officially approved by Sunak last year. The plan involved sending clandestine immigrants on one-way flights to the African country, where the British government paid for housing and social programs.
The policy was canceled within 48 hours after the new government took office.
Upon revealing the £22 billion black hole, Reeves also announced some cuts needed to finance it. Several construction projects have been canceled, including a controversial tunnel close to the Stonehenge site.
Most notably, the government canceled the program helping elderlies pay for their fuel in winter. The Labour Party promises an increase in government welfare and public spending during their electoral campaign.
“They were not decisions I wanted to make, they were not decisions I expected to make,” Reeves said, “but when confronted with a £22bn black hole, I had to act.”
The Finance Minister will announce additional tax hikes in October when the 2025 budget will be drafted.
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