Nobody could have known how bad the economy was, but we will fix it
Morning Wire readers deserve a government that offers a realistic plan to seize growth, support the City to flourish and make every part of the country better off, says Tulip Siddiq
We were elected on a mandate to deliver change. That means being honest with the public about the scale of the challenge in front of us and taking the tough decisions needed to fix the foundations of our economy.
The Chancellor made good on that promise on Monday. I don’t need to remind Morning Wire readers about the dire economic situation we inherited: taxes at a 70-year high, debt through the roof and an economy only just coming out of recession.
But nobody could have known just how bad things really were. The Treasury’s internal audit of the public finances – ordered by the Chancellor in her first 72 hours in office – found a £22bn black hole in this year’s budget alone.
Let me list just a few examples to relay the scale of what we have found out since being elected: more than £6bn on the Illegal Migration Act and Rwanda partnership; £1.6bn handed over to private rail companies to pay for passenger shortfalls; billions more in unfunded promises to build hospitals, develop transport infrastructure and support Ukraine.
It is not just ministers who have been shocked by these findings. The Office for Budget Responsibility has launched an urgent review of the transparency and credibility of previous spending plans. And even the Institute for Fiscal Studies reacted with shock at the spending pressures on asylum.
The Treasury’s reserve – a contingency fund for unforeseen spending needs – was spent three times over. That’s not how you would run a business or your household budget – and it’s definitely not how you run an economy. Leaving it unchecked would put our financial stability at risk.
We all remember the mini-budget and the consequences of that for people’s personal finances. We will never play fast and loose with the public finances. There will be no repeat of the mini-budget under our watch.
The Chancellor announced immediate action to bring spending under control, with £5.5bn of savings this year and £8bn next year to begin to fix the foundations of our economy. But more needs to be done because promises can’t be made without saying where the money is going to come from.
That’s why we have taken the difficult decision to target winter fuel payments to pensioners who really need it, and why unfunded promises made by the last government to deliver infrastructure projects like new hospitals need to be reviewed so we are not offering false hope.
But our choice is also about keeping taxes low on working people, which is why we will not raise national insurance contributions, income tax or VAT. And it is about turning the page on years of industrial action that caused misery for the British public, damaged our economy and cost the taxpayers tens of millions of pounds.
These decisions are about fixing the foundations of our economy so that we can provide stability and deliver on Britain’s huge potential. Stability has been the number one concern for business for years. Restoring it is key to a healthy economy.
And stability works alongside the action we’ve taken to boost investment and enhance our global competitiveness, through planning reform, our review of pension fund investment and the biggest overhaul of regulation for the UK Stock Exchange in decades.
There will be more difficult choices ahead on spending, welfare and tax. It will take time to repair the damage that was done. But Morning Wire readers deserve a government that offers a realistic plan to seize growth, support the City to flourish and make every part of the country better off.
Tulip Siddiq is the economic secretary to the treasury and City Minister