Reeves claims £350m cost of 22% pay rise for junior doctors ‘drop in ocean’ compared to overall cost of NHS strikes
In her interview on Times Radio this morning Rachel Reeves, the chancellor, said that funding the 22% pay rise for junior doctors would cost about £350m. She said that was “a drop in the ocean” compared to the £1.7bn direct costs of the NHS strikes. (See 8.16am.)
The £1.7bn figure is what the Treasury said in its document yesterday was the direct cost of strikes to the NHS. The report says the strikes also had a direct and indirect impact on the wider economy. It says:
Direct economic impacts. ONS GDP data covering previous strike days highlights lost activity across the health sector. In July 2023, one of the main contributors to the fall in monthly output was the human, health and social work activities sub-sector, which fell by 1.2%. This was attributed to a 2% fall in the human health activities industry amidst strike action from healthcare workers (senior doctors, radiographers and junior doctors).
Indirect economic impacts. There are also likely to be indirect economic effects from the impact of industrial action on health outcomes. The NHS elective waiting list in England reached a record high of 7.8 million in September 2023 up from 4.6 million in December 2019, in part exacerbated by industrial action. Over a similar period, ill-health related inactivity has increased sharply and has been the leading reason for rising economic inactivity, standing at a near-record 2.8 million people in the three months to May 2024. Analysis by the National Institute of Economic and Social Research has highlighted that the record size of healthcare waiting lists has likely contributed to the increase in ill-health related inactivity.
Key events
These posts on X are from George Eaton from the New Statesman on the difference between George Osborne and Rachel Reeves.
Reeves rewarding a key voter constituency – public-sector workers – under the guise of austerity is Osborne-esque but definitely not Osbornite.
— George Eaton (@georgeeaton) July 30, 2024
Reeves rewarding a key voter constituency – public-sector workers – under the guise of austerity is Osborne-esque but definitely not Osbornite.
Osborne froze public sector pay and refused to means-test pensioner benefits. Reeves has done the opposite. It’s almost as if Labour and the Tories have different electoral coalitions…
Reeves refuses to say HS2 will definitely run to Euston station in London
In her interview with LBC this morning, Rachel Reeves, the chancellor, refused to say the HS2 high-speed rail line will definitely reach Euston station in London.
When Rishi Sunak axed plans for the Birmingham to Manchester phase of HS2 last year, he also left a question mark over the future of the final 4.5 mile stretch into Euston.
The line will definitely run from Birmingham to Old Oak Common, a station in west London. Sunak said he wanted the line to run to Euston, but the last link is dependent on the project securing private sector funding.
Asked if HS2 would definitely run to Euston, Reeves told LBC:
We will look at the details of all of the projects that we have inherited. But look, we’ve made some difficult decisions yesterday on road and rail.
Jeremy Hunt rejects claims about Tory overspending as ‘absolute nonsense’
In interviews this morning Jeremy Hunt, the shadow chancellor, rejected Rachel Reeves’ claim that he left a £22bn black hole in the public finances.
Referring to the £6.4bn overspend on immigration and asylum measures, he claimed that this problem was known and that the Conservative government had a policy, the Rwanda plan, to deal with this.
Speaking to Sky News, he said:
We were warned by the Home Office, that the asylum bill could be up to £11bn a year by 2026 – that number was in the public domain.
And so we had a plan to deal with it. It was the Rwanda plan. What Labour did was they cancelled that plan on day one. As a result, all the money was spent on it without any of the benefits.
Referring to Reeves’s claim that the last government had spent the annual reserve three times over within the first three months of the financial year, he said that was “absolute nonsense”.
He went on:
We would have been able to live within our means. You can accuse me of making many mistakes, but not taking tough decisions on the public finances to make sure that they are in order is something that no one would accuse me of.
Reeves refuses to say if Labour will impose cap on adult social care costs before next election
Yesterday Rachel Reeves, the chancellor, said the government was shelving plans to impose a cap on the amount adults might have to pay for their own social care. This is something governments have been promising, but repeatedly delaying, since Andrew Dilnot recommended one in a report published in 2011.
The report published by the Treasury was unclear as to whether the plan was being shelved for good, or just for the foreseeable future. It said the government was “not proceeding with adult social care charging reforms” and went on:
The previous government committed to introduce these in October 2025 but did not put money aside for them. The reforms are now impossible to deliver in full to previously announced timeframes.
In her Today programme interview, asked if a cap would be imposed during this parliament (ie, before 2029), Reeves replied:
Wes Streeting [the health secretary] will work with the sector to now take forward plans to improve social care, and indeed to improve the crumbling state of our hospitals, because of the mess left by behind by the Conservative government.
But the worst thing that I could have done yesterday was to just accept that we were going to have to borrow £22bn more. That would have put at risk our economic and our financial stability.
We saw what happened when the previous prime minister, Liz Truss, did that. It resulted in pensions being put in peril, financial market turbulence and mortgage rates, interest rates and rents all going through the roof.
Reeves claims £350m cost of 22% pay rise for junior doctors ‘drop in ocean’ compared to overall cost of NHS strikes
In her interview on Times Radio this morning Rachel Reeves, the chancellor, said that funding the 22% pay rise for junior doctors would cost about £350m. She said that was “a drop in the ocean” compared to the £1.7bn direct costs of the NHS strikes. (See 8.16am.)
The £1.7bn figure is what the Treasury said in its document yesterday was the direct cost of strikes to the NHS. The report says the strikes also had a direct and indirect impact on the wider economy. It says:
Direct economic impacts. ONS GDP data covering previous strike days highlights lost activity across the health sector. In July 2023, one of the main contributors to the fall in monthly output was the human, health and social work activities sub-sector, which fell by 1.2%. This was attributed to a 2% fall in the human health activities industry amidst strike action from healthcare workers (senior doctors, radiographers and junior doctors).
Indirect economic impacts. There are also likely to be indirect economic effects from the impact of industrial action on health outcomes. The NHS elective waiting list in England reached a record high of 7.8 million in September 2023 up from 4.6 million in December 2019, in part exacerbated by industrial action. Over a similar period, ill-health related inactivity has increased sharply and has been the leading reason for rising economic inactivity, standing at a near-record 2.8 million people in the three months to May 2024. Analysis by the National Institute of Economic and Social Research has highlighted that the record size of healthcare waiting lists has likely contributed to the increase in ill-health related inactivity.
Balls, who, of course, is a former Labour cabinet minister, and a former shadow chancellor, questions whether Reeves is right to suggest that Jeremy Hunt is wholly to blame for the black hole. He says that other cabinet ministers and departments drew up the spending plans that she says were unfunded.
Reeves repeats the point she has been making all morning about how the public were misled. (See 8.06am.)
That is the end of the interview. But Balls goes on to say that “strictly speaking” Reeves was not right in how she is allocating blame. He says that, if civil servants are asked to approve something they think is improper, then can demand a ministerial direction (a written instruction, enabling them to show they raised objections in any future inquiry into whether public money was misspent).
The Home Office demanded a ministerial direction in relation to the Rwanda policy, but other policy decisions referenced by Reeves yesterday do not seem to have been covered by ministerial direction.
Reeves is asked about a letter sent by Darren Jones, the then shadow chief secretary to the Treasury, to the Treasury in November 2023 suggesting it would be wrong to means-test the winter fuel payment.
Here’s where it gets tricky: 7 months ago Darren Jones wrote to the Tories asking them to reassure pensioners that they wouldn’t means-test winter fuel payment… “Pensioners mustn’t be forced to bear the brunt of Tory economic failure,” he wrote… https://t.co/Qf0qvsL22E
— Alex Wickham (@alexwickham) July 29, 2024
Reeves says Labour has had to take decisions it did not want to take.
Rachel Reeves, the chancellor, is now being interviewed on ITV’s Good Morning Britain.
Asked about a message from a viewer complaining about the decision to cut the winter fuel payment, Reeves says she discovered a £22bn black hole in the public finances.
If she had not addressed that, it could have put the government’s finances in peril, in the way that Liz Truss did.
Ed Balls, on of the GMB presenters, asks her about the Daily Mail front page headline, saying old people will pay for Labour’s decisions.
Reeves says she is requiring efficiency savings. But she repeats the point about the £22bn black hole.
Husain asks about Hunt’s point about the estimates presented to parliament last week having different spending figures. (See 8.10am.)
Reeves says the estimates presented to parliament last week were the ones from the last government. MPs needed to vote on them to give the government authority to spend money, she says. She says updated estimates will be published later this year.
And that’s the end of the Today interview.
Q: Before the election, Labour politicians were asked over and over again about comments from groups like the Institute for Fiscal Studies saying there was a black hole in the public finances. But you refused to accept that.
Reeves says the IFS said yesterday the situation was worse than they thought.
Q: But you used to say you would grow your way out of these problems?
Reeves says she remains committed to growth. She says she has announced moves to promote growth. But she did not anticipate a £22bn black hole. And no one else anticipated that either – not the IFS or the OBR. Only the last government knew. And they covered it up, she says.
Husain moves on to adult social care, and she plays a clip from an interview the programme did with Andrew Dilnot earlier. Dilnot is the economist who wrote a report for the coalition government recommending having a cap on what people might have to pay for adult social care (a policy that was endlessly postponed by the Tories, and shelved by Reeves yesterday). Dilnot told Today Reeves’ decision was “a tragedy”.
Reeves says local authorities did not have the money to fund this scheme.
Q: But Labour’s manifesto talked about a national care service?
Reeves says there are lots of things Labour would like to do. But it needs to have the money available.
She says she found the reserves for this year had been spent three times over, just three months into the start of the financial year.
Q: Will you cap social care costs later in this parliament?
Reeves says Wes Streeting will be drawing up plans for social care.
She says the Liz Truss experience shows what happens when the government spends money it does not have.
Q: Do you accept that, having funded a 22% pay rise for junior doctors, other health workers will want the same?
Reeves says the pay review bodies recommended different settlements for different groups of workers.
She says she published analysis yesterday showing the health strikes cost £1.7bn.
That is a reference to this passage from the report published yesterday.
A total of £1.7bn of funding was provided to NHS England to mitigate against the direct cost of industrial action in 2023-24 and ease pressures on hospitals. This was provided through a combination of reprioritised Department of Health and Social Care funding and new funding from HM Treasury. This includes the cost to cover shifts and lost pay efficiencies, whilst subtracting salary savings across those staff on strike.
She says the government did not give the junior doctors all they wanted. They wanted 35%, she says.
Reeves defends above-inflation pay increase for public sector workers, saying they’re in line with private sector pay deals
Mishal Husain is interview Rachel Reeves on the Today programme now.
Q: Do you accept that part of the £22bn black hole comes from decisions you made, on public sector pay?
Reeves says the last government set the remit for the public sector pay review bodies. It did not include guidance on what was affordable. She says it was right to accept the recommendations. It would have been almost unprecedented to ignore them, she says.
Q: So you would have set tighter guidelines for the public sector pay?
Reeves says it is right public sector workers are properly rewarded.
She says some of the money, just over a third, will be funded by efficiency savings.
Q: Are you saying you would rather have given them less?
Reeves says it is right public sector workers are properly rewarded. These pay increases are in line with what is happening in the private sector, she says.
Last night Jeremy Hunt, the shadow chancellor, wrote to Simon Case, the cabinet secretary, asking why Rachel Reeves had presented public spending figures to MPs that contradicted what the Treasury said in the estimates (public spending figures) it presented to parliament last week.
Hunt said:
After the statement made in the House of Commons today, I am writing to follow up with deep concern over some of the conflicting claims that have been made which risk bringing the civil service into disrepute.
It is deeply troubling that the chancellor has today chosen to make claims about the public finances to the House of Commons which directly contradict the documents and legislation the new government put before parliament, signed off by senior civil servant accounting officers.
The Treasury has rejected this claim (as explained on this blog late yesterday). In the document it published yesterday it said it used the pre-election figures in the estimates to allow a vote on them to take place before recess. The report explained:
The government laid main estimates for 2024-25 before parliament on 18 July, the earliest available opportunity after the general election and considerably later than the usual timetable. These estimates were prepared before the general election, and the government was forced to lay them unchanged in order to allow them to be voted on before the summer recess. This was necessary to avoid departments experiencing cash shortages over the summer. The pressures set out in this document represent a more realistic assessment of DEL spending. As usual, departmental spending limits will be finalised at supplementary estimates.
Rachel Reeves says Tories ‘lied about public finances’ as she defends her response to £22bn spending shortfall
Good morning. Yesterday’s statement from Rachel Reeves on the “spending inheritance” was not a budget, but it had all the significance of what the Treasury call a “fiscal event” and, as happens after a budget, the chancellor and shadow chancellor are fighting it out on the airwaves on the next morning’s interview round.
Here is our overnight story about what Reeves announced, by Pippa Crerar, Larry Elliott and Peter Walker.
And here is Nimo Omer’s assessment in her First Edition newsletter.
In the Commons yesterday Reeves was constrained in what she could say about the inheritance left by the Tories by rules that prevent MPs from calling each other liars. Sky News does not have these restrictions, and in her interview on the channel this morning Reeves let rip, accusing her predecessor of deliberately misleading the public about the state of the public finances. She said:
Jeremy Hunt covered up from the House of Commons and from the country the true state of the public finances. He did that knowingly and deliberately.
He lied, and they lied during the election campaign about the state of the public finances …
It is beyond reckless and irresponsible, and at a time when trust in politics is already at an all-time low … to then mislead people in that way during a general election about what was possible – it was unforgivable.
I will post more from her interviews, and Hunt’s, shortly.
Here is the agenda for the day.
Morning: Keir Starmer chairs cabinet.
11.30am: David Lammy, the foreign secretary, takes questions in the Commons.
After 12.30pm: Angela Rayner, the deputy PM and housing secretary, gives a statement to MPs on changes to planning rules. Later she will do a planning-related visit in Hampshire.
Afternoon: MPs debate the budget responsibility bill at second reading.
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