Public coffers worst since WWII: Chancellor Rachel Reeves

In her maiden speech as Chancellor, she told business leaders that there was ‘no time to waste’ in reversing the UK’s stagnant economic growth.

Rachel Reeves delivers her maiden speech as chancellor. Picture: AFP

British Chancellor of the Exchequer Rachel Reeves has ordered the Treasury to carry out a root-and-branch review of the public finances, claiming that Labour had received the worst economic inheritance of any government since World War II.

In her maiden speech as Chancellor, Ms Reeves told business leaders that there was “no time to waste” in reversing the UK’s stagnant economic growth, as she launched a set of reforms of the British planning system designed to spur an immediate building boom.

Ms Reeves, the first woman to hold the office of chancellor at Westminster, revealed she had told the Treasury over the weekend to carry out a health check on the public finances ahead of an expected autumn budget, the results of which will be published before the summer parliamentary recess.

Describing this as an “assessment of our spending inheritance so that I can understand the full scale of the challenge”, she sought to pin the blame for tough decisions on the Conservatives.

The move will provoke fresh speculation that such a review will be used as a platform for tax rises at a budget due in the autumn. The Conservatives accused Ms Reeves of a “ruse to raid pensions and raise taxes”.

Labour sources deny this, insisting the review is designed to get the best value out of public services. Ms Reeves’s deputy, Darren Jones, insisted that the party did not have a “secret tax plan” it would implement in government.

Ms Reeves said she had told Treasury officials she would stick to promises not to raise national insurance, income tax or VAT, rejecting the argument that a new government could “renege on our tax pledges as a large majority in parliament means we have the licence to roll back on the principles of sound money and economic responsibility”.

However, she has consistently avoided ruling out raising a range of other taxes and there has long been speculation that Labour could tweak the capital gains tax regimen to raise revenue.

The Office for Budget Responsibility last published its assessment of the economy at the March budget, and Ms Reeves has been warned by experts such as the Institute for Fiscal Studies that she cannot claim her inheritance is worse than feared.

She said she would be meeting OBR chairman Richard Hughes, and Bank of England governor Andrew Bailey in coming days.

Treasury analysis released ahead of the speech found that, had the UK economy grown at Organisation for Economic Co-operation and Development members’ average speed since 2010, it would be £143bn ($272bn) larger, the equivalent of £2081 ($3954) per person.

“I have repeatedly warned that whoever won the general election would inherit the worst set of circumstances since the Second World War,” Ms Reeves said.

“What I have seen in the past 72 hours has only confirmed that.

“Our economy has been held back by decisions deferred and decisions ducked. Political self-interest put ahead of the national interest. A government that put party first and country second.”

Under current spending plans set out at the last budget, unprotected government departments, such as local councils and the legal system, face about £20bn ($38bn) of funding cuts.

This is despite the tax burden being on course to reach a post-World War II high. Ms Reeves argues higher economic growth can avoid the need for spending cuts or tax rises, and her first act was to unveil a series of reforms aimed to boost the economy.

THE TIMES