Reported £20bn gap in public finances same size as Tories’ national insurance cuts, says economic expert – business live | Business

The public should not expect any tax announcements in Rachel Reeves’s statement on Monday, Cabinet Office minister Pat McFadden said.

McFadden told Times Radio:

Today is not a budget, people shouldn’t expect tax announcements today.

We said a number of things about tax during the election, we said that we wouldn’t increase income tax rates, national insurance rates, or VAT.

Those things still hold.

Today, what you will hear is how we are going to respond to that opening of the books. And I think what people should expect today is not tax measures but a chancellor that is prepared to take some very tough decisions on spending, to show that we put financial stability first and we take seriously that as the foundation for growing the economy.

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

All eyes are on the Treasury today, as UK chancellor Rachel Reeves prepares to issue an update on the state of the country’s public finances and what the Labour party has inherited from the former Tory government.

Reeves is expected to tell MPs that the Tories left a £20bn hole in government spending for essential public services.

And a think tank has now said that the £20bn shortfall is equivalent to the Tories’ pre-election national insurance cuts.

Paul Johnson, director of the Institute for Fiscal Studies, told BBC Breakfast:

It is very striking that if this problem is about £20 billion big, that is exactly the scale of the national insurance cuts implemented by Jeremy Hunt just before the election.

Now, if those cuts were implemented in the knowledge that there was this kind of hole, that is not good policy, to put it mildly.

The Tory government announced 2p would be cut from National Insurance in last year’s autumn statement, and announced a further 2p cut in this year’s spring budget.

The combined cuts were expected to save the average earner £900 a year.

However, the former government was said to have been been looking at further public spending cuts, had the Tories won last month’s election, as one way to pay for the tax reduction. That was despite economists’ warnings that such a move would cause public services to buckle.

Stay tuned as we look ahead to Reeve’s address, which is expected to lay the groundwork for tax rises, cuts to public spending, and delays to some major infrastructure projects.

The agenda

• 9:30am BST: UK mortgage approvals, net mortgage lending and consumer credit for June

• 3:30pm BST: UK Chancellor Rachel Reeves to set out state of UK public finances