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PA Media<\/span><\/div>\n<\/div>\n<\/figure>\nThe new Labour government has been in power for just over three weeks.<\/p>\n
In that time, it says ministers have found government departments in a much worse state than they thought.<\/p>\n
On Monday, the Chancellor will argue the public finances are in a bad place \u2013 and that will mean tough decisions. <\/p>\n
To use the Westminster jargon, she’s rolling the pitch for announcements that might not be popular. But how much of what the government is facing is actually a surprise? And how much are these ministers trying to shape the political narrative?<\/p>\n<\/div>\n
The first thing to highlight is that we already had a good idea of the state of the country\u2019s books<\/a>. The Office for Budget Responsibility (OBR) publishes them twice a year \u2013 we last got a full breakdown last November.<\/p>\n We also knew during the election campaign that there were tough decisions to come. <\/p>\n The BBC covered them<\/a> \u2013 including warnings that there were likely to be tax rises or cuts or both<\/a> as a result of a squeeze on public spending. <\/p>\n The Institute for Fiscal Studies (IFS) suggested<\/a> some government departments could see cuts of between \u00a310bn and \u00a320bn \u2013 something Labour were reluctant to engage with during the campaign.<\/p>\n So what is new? <\/p>\n Treasury insiders are claiming there have been surprises since they took over.<\/p>\n One is that public sector pay deals are likely to cost a lot more than expected.<\/p>\n Independent pay review bodies have said teachers and nurses should get 5.5%<\/a> – more than most were expecting. <\/p>\n The last government budgeted for a lower settlement of 2%, sources say, so to fund the much higher deal will cost billions of pounds. If a similar increase happens across the public sector, it would cost billions more.<\/p>\n Labour has also claimed that hundreds of millions were being spent on the Rwanda scheme<\/a> \u2013 a lot more than it realised. <\/p>\n Although some of that money was pay for civil servants who would have been working for the department anyway, sources say a lot of it was operational costs which were only discovered once the new government went through the books.<\/p>\n The Department of Health and Social Care has also warned of hospital building programmes in England costing a lot more than budgeted for.<\/p>\n Sources have also said there are extra spending commitments announced after the Autumn Statement which need to be paid for. Expect to hear about \u201cin-year pressures\u201d \u2013 extra spending that needs to be allocated immediately.<\/p>\n<\/div>\n The Treasury intends to publish a full report and breakdown on Monday, explaining where it thinks it has found a \u201cblack hole\u201d. <\/p>\n At that point we will be able to scrutinise the calculations and see what is really new.<\/p>\n But it was known before the election that whoever was in power afterwards would face big challenges. <\/p>\n Rachel Reeves started talking about a tricky inheritance well before polling day. <\/p>\n Ms Reeves told the Financial Times<\/a> in June: \u201cWe\u2019ve got the OBR now.<\/p>\n “We know things are in a pretty bad state\u2026 You don\u2019t need to win an election to find that out.\u201d<\/p>\n This is not just about the economy.<\/p>\n Ministers have been pointing to other areas where they say things are worse than they expected – the health service<\/a>, prisons<\/a>, the environment and more.<\/p>\n On prisons, the justice secretary announced some offenders in England would be released earlier<\/a> to ease overcrowding. She blamed that on the \u201cscale of the emergency\u201d the new government had left.<\/p>\n It is true to say there are big challenges with overcrowding. Senior ministers in the last government wanted action taken \u2013 but it was not signed off before the election.<\/p>\n But was it a surprise to the incoming government? <\/p>\n Sources in the justice department point to the system being a lot closer to \u201cdisaster\u201d than they thought and how little time they had to try to solve the issue. <\/p>\n‘Black hole’<\/h2>\n<\/p>\n