New UK Treasury chief claims previous government ‘covered up’ financial turmoil before election

LONDON (AP) — The new head of the British Treasury She claims the previous government covered up the dire state of the country’s finances as she prepares to deliver a major speech to parliament on Monday that is widely expected to lay the groundwork for tax increases.

In excerpts of her speech published on Sunday night, Reeves said she was shocked by the scale of the problems she had uncovered following a department-by-department review of public spending commissioned shortly after she took office three weeks ago. In a message posted on the social media platform X on Monday, Labour confirmed that the Treasury review had identified a £20bn ($26bn) deficit in public finances.

“It’s time to come clean with the public and tell them the truth,” Keanu Reeves will tell the House of Commons. “The previous government refused to make tough decisions. They covered up the real state of public finances. And then they ran away.”

Prime Minister Keir Starmer The left-wing Labour Party won a landslide election victory earlier this month, ending 14 years of Conservative rule. During the campaign, critics accused both parties of a “conspiracy of silence” about the scale of the financial challenges facing the next government.

Labour pledged during the campaign not to raise taxes on “working people”, saying its measures would enable faster economic growth and generate the extra revenue the government needs. The Conservatives, meanwhile, have promised further tax cuts in the autumn if they are returned to power.

To prove that the previous government was not honest about the challenges facing Britain, Starmer’s office pointed to recent comments by former Treasury chief Jeremy Hunt, confirming that he would not have been able to cut taxes this year if the Conservatives had returned to power.

The comments came during an interview with the BBC in which Hunt also accused Labour of exaggerating the situation to justify raising taxes now that it has won the election.

“The reason we are hearing about this terrible economic legacy is because Labour wants to raise taxes,” Hunt said on July 21. “If they wanted to raise taxes, all the numbers were clear before the election. (…) They should have been straight with the British public.”

Excerpts from Reeves’ speech do not mention any potential tax increases, although analysts speculate that such measures will not be introduced until the government unveils its budget later this year.

Reeves instead focused on efforts to rein in spending, saying a new office would immediately begin identifying “wasteful spending.” She also plans to end nonessential spending on consultants and sell off excess real estate. Some transportation projects whose funding has yet to be determined could also be eliminated, or at least postponed.

The government said the military had been “stripped” at a time of increasing global threats and the National Health Service was “broken”, with some 7.6 million people waiting for treatment.

And despite billions spent on housing migrants and tackling criminal gangs ferrying them across the Channel in dangerous inflatable boats, the number of people making the crossing continues to rise, Starmer’s office said. Some 15,832 people have already crossed the Channel in small boats this year, 9% more than in the same period in 2023.

The government’s dilemma should come as no surprise, according to the Institute for Fiscal Studies, an independent think tank focusing on British economic policy.

At the start of the election campaign, the institute said the UK was in a “precarious fiscal position” and that the new government would have to either raise taxes, cut spending or relax rules on public borrowing.

“It would be fundamentally dishonest for a party to come into power and then declare that the situation is ‘worse than expected,’” the IFS said on May 25. “The next government does not need to come into power to ‘open the books.’ These books are published transparently and can be consulted by all.”