Britain is ‘broke and broken’, newly-elected Labour govt claims

Britain‘s government has declared the country “broke and broken” ahead of an evaluation of public finances on Monday, which the newly-elected Labour Party will use to blame a 20 billion pound ($26 billion) shortfall to their predecessors. Labour, which won in a landslide victory on July 4, claims that the situation in many areas of public policy is worse than expected.
Finance minister Rachel Reeves is set to present the results of a fiscal review to parliament, accusing the Conservative Party, which governed for the past 14 years, of making unfunded spending commitments to gain public favor.
According to a statement from Prime Minister Keir Starmer’s office, “The assessment will show that Britain is broke and broken – revealing the mess that populist politics has made of the economy and public services.” The statement adds, “It will show that the previous government made significant funding commitments for this financial year without knowing where the money would come from.”
The Conservative Party has dismissed Labour’s claims of a financial ‘black hole’ as a pretext for tax increases that were not disclosed during the election campaign. Some economists also expressed skepticism, arguing that Labour should have anticipated most issues before taking office.

Reeves will also announce the date for her first budget, commission independent forecasts to be published alongside that budget, and outline plans for the formal spending review process. This process determines the budget allocation for each department. Additionally, Reeves is expected to approve above-inflation pay raises for teachers and health workers.
The exact approach Labour will take to address the identified shortfall remains unclear. Reeves is limited by election promises not to raise rates of income tax, National Insurance social security payments, value-added tax, and corporation tax.

Media reports suggest that Reeves might use Monday’s statement to suggest other tax increases in the subsequent budget. The Financial Times reported that some road and hospital building projects might be delayed.
Although the government’s statement did not specify any measures, senior Labour minister Pat McFadden emphasised, “We will not shy away from being honest with the public about the reality of what we have inherited.”
Labour has spent the initial weeks of their term focusing on the difficult financial situation they inherited, aiming to set realistic expectations among the public. The party’s immediate emphasis is on transparency and detailing the challenges left by the previous administration.