Chancellor Rachel Reeves will unveil a £20bn “black hole” in the public finances today.
In an address to the Commons, she is expected to blame the Conservatives for their poor management of the UK economy, and reveal what measures she will take to try to close the gap.
The Treasury will today publish an internal audit where it will reveal a gap of £20bn between tax revenues coming into the government’s pockets and expected spending.
Reeves is likely to cancel some road and rail projects, cut down on spending on external consultants and try to limit public sector waste in an effort to get the economy back on track.
It could mean the road tunnel under Stonehenge gets scrapped, as well as Boris Johnson’s New Hospital programme.
Reeves is also likely to ask the Office for Budget Responsibility to assess the public finances, and possibly start a wider spending review to examine budgets over the longer period.
She may announce above-inflation pay rises for some public sector workers in line with independent pay review bodies’ advice.
Reeves could launch the Office of Value for Money, too, to identify and recommend savings.
She is not expected to suggest increasing taxes right now, though, as her annual Budget will still be unveiled in the autumn.
Labour has already accused the previous government of “covering up” the extent of its spending problems within government, and the chancellor previously claimed the Tories “ran away” from the crises by calling an election.
Yet, the Conservatives have already claimed Reeves’ message is meant to “con the British public” so she can raise taxes.
Former Tory chancellor Jeremy Hunt said the books are “wide open and what they show is a healthy, growing economy”.
Economists have been openly warning about the chasm in public spending for some time.
In the run-up election, Institute for Fiscal Studies said both Labour and the Conservatives were “ducking” the reality the next government would face – either raise taxes, cut spending or drop their plan to reduce debt.
But Labour have maintained that the situation they’ve uncovered since being elected is much worse than they expected.
The chancellor of the Duchy of Lancaster, Pat McFadden, claimed the Tories “didn’t tell us they were emptying the country’s reserves, which is for emergencies”.