Addressing the House of Commons today (Monday 29th July) the
Chancellor pledged to ‘restore economic stability' after
revealing £22 billion of unfunded pressures inherited from the
previous Government.
Findings from a Treasury audit commissioned by the Chancellor
expose billions of pounds of unfunded commitments from the
previous Government, including the Rwanda scheme, the Advanced
British Standard and the New Hospital Programme.
The previous Government also failed to increase Departmental
budgets to cover public sector pay settlements, which were £11-12
billion higher than accounted for at the last Spending review.
All of which were made on top of pressures resulting from higher
inflation, increased asylum costs and funding for Ukraine.
Taking immediate action, the Chancellor announced £5.5 billion of
savings this year and £8.1 billion next year to tackle the
overspend. She also commits to set out full fiscal plans,
alongside a Spending Review, at the Budget on 30th
October.
Chancellor of the Exchequer, said:
“This is not the statement I wanted to give today, and these are
not the decisions I wanted to make. But they are the right
decisions in difficult circumstances.”
The difficult decisions taken by the Chancellor have secured
savings including over £1 billion next year, rising to over £4
billion by 29/30 by not proceeding with the previous government's
unfunded adult social care charging reforms.
Around £1.5 billion will be saved per year by targeting Winter
Fuel Payments meaning households with someone aged over State
Pension age receiving Pension Credit, Universal Credit, Income
Support, income-based Jobseeker's Allowance and income-related
Employment and Support Allowance will continue to receive Winter
Fuel Payments. This will better target support for heating costs
at those who need it.
Immediate savings include £800 million this year and £1.4 billion
next year from scrapping the Rwanda migration partnership and
scrapping retrospection of the Illegal Migration Act, £70 million
this year by cancelling the Investment Opportunity Fund and other
small projects, £185 million next year from cancelling the
Advanced British Standard and £785 million next year from
stopping unaffordable road and railway schemes. The Chancellor
also announced a review of the underdelivering New Hospital
Programme.
To provide certainty for public sector workers and help put an
end to devastating strikes costing billions of pounds, the
Chancellor accepted the independent Pay Review Body
recommendations and confirm pay uplifts averaging 5.5% for public
sector workers.
To ensure that no Government is faced with a spending cliff-edge
like this again the Chancellor set out plans to ensure Spending
Reviews are set every two years to cover a three-year period,
with a one year overlap with the previous Spending Review,
helping build in greater certainty and stability over public
finances. Transparency over in year spending pressures will also
be enhanced, with more information being provided to the OBR. In
the House the Chancellor also re-committed to a single major
fiscal event a year.
The Chancellor also outlined long-term plans to tackle
unacceptably high levels of welfare fraud and error as well as
addressing falling public sector productivity and a new Office of
Value for Money. During her statement the Chancellor outlined
next steps in delivering tax commitments from the manifesto, to
provide taxpayers with certainty ahead of their final
confirmation at the Budget.
This includes ending the VAT tax breaks for private schools from
1 January 2025 to help recruit 6,500 new teachers, as well as
replacing the outdated non-domicile regime with a new
internationally competitive residence-based regime.
As also set out in the manifesto, the Chancellor confirmed plans
for the Energy Profits Levy to be extended one year to 31 March
2030, have its investment allowances tightened and to increase
the rate of the levy by three percentage points to 38% from 1
November 2024.
A call for evidence confirming the government's intention to take
action on the carried interest loophole has also been published,
as well as a commitment to update on policies at the Budget to
help close the tax gap further.
Further details for all tax policies, including costings
certified by the Office for Budget Responsibility, will be
published at the Budget.
