Treasury hopes to uncover £20bn hole in public finances, Sky News understands | Politics News

A Treasury audit is expected to reveal a £20 billion black hole in public spending, Sky News understands.

Chancellor Rachel Reeves is due to give a speech on Monday, when she is expected to reveal the state of the public finances and potentially set the stage for tax rises in the autumn.

A Labor source told Sky News that the British public will “finally see the true scale of the damage the Tories have done to the public finances”.

“They spent taxpayers’ money like never before because they knew someone else would have to foot the bill,” the source said.

“Now it’s up to the Labor Party to fix the foundations of our economy and that work has already begun.”

During the election campaign, Labor promised not to raise income tax, VAT or Social Security at the election – meaning Ms Reeves could turn to capital gains tax, pension tax relief and the inheritance tax as potential options in the budget.

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The chancellor could also change fiscal rules or overhaul the way debt resulting from quantitative easing is repaid.

Asked about the black hole at a meeting of G20 finance ministers in Brazil, Ms Reeves said: “I will give a statement to parliament on Monday, but I have always been honest about the scale of the challenge we face as a new government, and let me be very clear: we will fix the mess we inherited.”

The workers’ problem was made worse by the fact that independent pay review bodies told ministers that millions of public sector workers should receive a 5.5% salary increase.

Sir Keir Starmer’s government could need up to £10 billion to cover that pay rise if all public sector workers received the 5.5% rise, according to Paul Johnson of the Institute for Fiscal Studies.

And speaking to Sky News this morning, Health Secretary Wes Streeting acknowledged that “tough choices” had to be made to fix what he called the previous government’s “works of fiction”.

He said the rest of the government was “100%” behind the chancellor in her quest to fix the public finances and that he had found “example after example” of “unrealistic timetables” and “unfunded” commitments within his own department.

“There are difficult choices to make in terms of my involvement in the audit of public finances,” he said.

The health secretary highlighted the program initiated by the last government to build 40 new hospitals, which he said contained “completely fictitious timetables” and “unfunded commitments made by the previous government”.

Pressed on whether the black hole could be in the region of £20 billion, Streeting said: “Well, that’s for the Chancellor to announce in terms of value.

“I think we were shocked by the state of annual challenges in public finances.

“And I think conservatives should hang their heads in shame about that.”

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Asked whether the Conservatives had been “selective with the truth” about the state of the public finances, Mel Stride, the shadow work and pensions secretary who is running to be Conservative leadertold Sky News: “No way.

“Let’s be very clear about what’s going on here: when Wes Streeting refers to the total fiction of Labour, he could be referring to what the Labor Party said in the run-up to the general election about taxation.”

Stride said the Labor Party had ruled out raising most taxes during the election, despite “the books being open”.

“What they’re doing now is rolling the field around saying they’ve suddenly opened everything up, taken a look, and it’s all much worse than they could have ever imagined and therefore we’re going to raise your taxes,” he said.

“They knew exactly where the economy was before the general election. They are simply going out of their way to renege on their promises to the British people when the budget is passed in the autumn – and we will hold them to account for that.”

A Treasury spokesperson said: “The Chancellor has tasked officials with providing an assessment of the state of the government’s spending legacy, which will be presented to parliament before the summer holidays.”