Labour 'con' will lead to tax bombshell, Tories warn

Labour claims that there is a £20 billion black hole in public finances is a “con” to give the party cover to break its tax promises.

Chancellor Rachel Reeves will set out the “true scale of the damage” on Monday that is expected to claim there is a big gap in how much is needed to meet spending commitments.

But Jeremy Hunt warned that instead of taking tough decisions she is laying the groundwork for hiking up taxes.

He said: “Labour’s claims are nothing but a fabrication - the books have been wide open since the OBR was set up 14 years ago.

“They show an economy that has turned the corner and a deficit one-third of that left behind by Labour - and not this nonsense the Chancellor is peddling.

“The reality is she does not want to take the difficult decisions on pay, productivity or welfare reform that would have meant we could live within our means and is laying the ground for tax rises.

“After Labour promised 50 times not to do this, they will find trust in the new government evaporates sooner than they expect.”

Laura Trott, shadow Treasury minister, said the pledges made during the election by Labour would be abandoned.

She said: "This is nothing but a con designed to mask Labour's broken promises on tax rises."

During the election, Labour insisted its manifesto was fully costed and promised it would not raise income tax, national insurance or VAT.

But the party suggested it might discover the financial situation was worse than feared if it took power.

Paul Johnson, director of the Institute for Fiscal Studies, dismissed the claim at the time, saying: “Oh dear, oh dear. The old ‘we may open the books and discover the situation is even worse…’

“The books are wide open, fully transparent. That really won't wash.”

In the days after becoming Chancellor, Ms Reeves ordered Treasury officials to carry out a spending audit that is expected to say there is a £20 billion shortfall in public finances, including in areas such as asylum and public sector pay.

Health Secretary Wes Streeting said yesterday (FRI) that Labour had discovered the state of the public finances was “shocking” since entering Government.

“We knew that the economic inheritance would be the worst since the Second World War, he added.

“That’s why ahead of the General Election we were so disciplined about our manifesto to make sure the promises we made would be promises we would keep and the country could afford,” he told Times Radio.

“What I think we have found shocking is the state of the public finances in the year that we’ve inherited and that means tough choices … as the Chancellor, (Rachel Reeves) will continue to show iron discipline and she will have the full support of the entire Cabinet.

“Because these aren’t just tough choices for the Chancellor, these are tough choices for all of us and we’re determined to meet that challenge, to be honest with people, to not duck the difficult decisions and to make sure that we make the right choices now that set Britain up for the longer-term success that we need.”

Ms Reeves is unlikely to announce tax hikes on Monday, but will use the speech to say the situation is more dire than feared and then announce a date for a budget in the October.

A Labour source said: “On Monday, the British public are finally going to see the true scale of the damage the Conservatives have done to the public finances.

“They spent taxpayers’ money like no tomorrow because they knew someone else would have to pick up the bill.

“It now falls to Labour to fix the foundations of our economy and that work has already begun.”

Tory leadership hopeful Mel Stride said Labour is “rolling the pitch for tax rises in the autumn, having fought the general election on the basis that they were very clear about generally not putting up taxes."

John O’Connell, chief executive of the TaxPayers' Alliance, said: “Taxpayers will not be shocked by the state of the public finances, which successive governments simply ignored for short term political gain.

“The national debt is at catastrophically high levels, but with the tax burden already heading to an 80-year high the solution surely cannot be to hike taxes which would not only break an election promise but could deal a major blow to hopes on growth.

“Rachel Reeves would be better placed to take the serious, long-term decisions on spending that she has criticised previous chancellors for ducking.”

Westminster SNP leader Stephen Flynn said Ms Reeves should “apologise for misleading voters” because he had warned there was a shortfall in funding.

“You must now come clean on where the axe will fall under your plans and whether you intend to cut public services, raise taxes or both – having previously denied you would do either,” he added.