22 billion British pounds - that's the budget hole the Tories have left Labour. The new government must tighten its belts. But how?
The UK's new Chancellor of the Exchequer, Rachel Reeves, faces a huge problem. As she begins to learn about the legacy left to her by the Conservative Party government, Reeves discovers that the deficit is much bigger than she thought. A whole 22 billion British pounds are missing.
The Tories have made one unfulfillable commitment after another, she reports in the British House of Commons. They have promised hospitals, roads and public transport - although there is no money for them, writes ARD. Because they knew that someone else would have to solve these problems.
Covering excessive spending?
But there's worse news, Reeves says: The Conservatives haven't even reported their excessive spending, they've almost covered it up. In other words, a "black hole" has opened, writes ARD. According to Reeves, London needs to rethink every spend from here on out. That's because Labor had committed to keeping the Conservatives' old medium-term budget plan. And it doesn't give many opportunities for maneuvering.
At the same time, however, the need for money is huge - for example, in health care, which is in extremely poor condition or in crumbling infrastructure. Public sector wages are frozen and there are dozens of construction sites across the country. Labor was elected for this reason too - people wanted someone to solve all these problems.
Instead of spending, Labor should tighten its belts further
Instead of allowing himself to spend money to solve the listed challenges, Reeves will have to economize. Over the next two years, around 16 billion euros must be compensated. Even the ministers need to think about what and how they can save - for example by paying less for marketing and consulting services, explains the German public legal media.
Some of the measures Reeves must take will directly affect citizens. The government will only pay winter heating benefits to needy pensioners, instead of everyone as it was before. Compulsory math lessons for all children up to the age of 18 will be ended, and several road construction projects will also be halted. The construction of new hospitals will also have to be suspended.
It is not entirely true, however, that Labor is embarking on a new austerity policy, as their Conservative predecessors did in recent years, ARD explains. Reeves announced a public sector pay raise, and a decent one: Teachers, nurses, doctors and military personnel will receive between 5.5 and 6 percent higher wages. The nursing dispute over pay rises that led to multiple strikes has also been resolved.
Economists talk about shock
Reeves' predecessor Jeremy Hunt warned that Labor would use the deficit as an excuse to raise taxes. However, it turns out that Reeves' plans are completely different - the minister has no intention of raising general income tax, VAT and social security, writes ARD.
British economists agree with Reeves' direction. Jonathan Portes of King's College London said it was expected that the Tories had left a large deficit, but the true size of it was shocking. Even financial experts didn't think the Conservatives could spend six billion more on the controversial plan to send migrants to Rwanda alone. According to Portes, the austerity measures envisioned by Reeves make sense because they will cause minimal problems and economic growth will not suffer much.