Rachel Reeves has scrapped some winter fuel payments, along with a raft of other government programmes and policies to plug a projected government overspend of £22bn.
The chancellor said those not in receipt of pension credit will no longer receive the extra money as she repeatedly told MPs: “If we cannot afford it, we cannot do it.”
The chancellor also announced that adult social care charging reforms, which had been delated by the previous government, would also not go forward on the new government’s watch, in a move that will save more than £1bn by the end of next year.
In total, all departments have been expected to find savings worth an estimated £3bn, Ms Reeves said, while a number of projects – including Boris Johnson’s programme to build 40 new hospitals and to restore old railway lines – will be reviewed or cancelled.
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The chancellor laid blame for her decisions on the previous government, accusing the Conservatives of having “let people down” by making “commitment after commitment without knowing where the money was going to come from”.
“Today I am calling out the Conservatives’ cover up and I am taking the first steps to clean up what they have left behind,” she said.
Shadow chancellor Jeremy Hunt, sitting opposite Ms Reeves’ in the Commons, immediately refuted her characterisation of the previous government, saying her inheritance statement was “not economic, it’s political”.
“Today, she will fool absolutely no-one with a shameless attempt to lay the grounds for tax rises she didn’t have the courage to tell us about,” he said.
“She says the information is new, but she herself told the Financial Times, ‘you don’t need to win an election to find out the state of public finances as we’ve got the OBR (Office for Budget Responsibility) now’.”
Mr Hunt cited economic expert Paul Johnson, of the Institute for Fiscal Studies, and said the state of public finances “were apparent pre-election to anyone who cared to look – which is why he and other independent figures say her argument is not credible and won’t wash”.
He added: “She wants to blame the last Conservative government for tax rises and project cancellations she’s been planning all along.”
Ms Reeves said the decision to scrap winter fuel payments for some pensioners was a “difficult” one she did not want to make.
“This level of overspend is not sustainable,” she said.
“Left unchecked, it is a risk to economic stability and, unlike the party opposite, I will never take risks with our country’s economic stability.”
Ms Reeves said that while the government would continue to protect the pension triple lock – the measure to raise state pensions every year by the level of average earnings, inflation or 2.5% – she said those “not in receipt of pension credit or certain other means-tested benefits will no longer receive the winter fuel payment from this year onwards”.
She said the government would however continue to provide winter fuel payments worth £200 to households receiving pension credit or £300 to households in receipt of pension credit with someone over the age of 80.
“Let me be clear, this is not a decision I wanted to make, nor is it the one I expected to make – but these are the necessary and urgent decisions that I must make,” she argued.
Ms Reeves’ statement came after the news that junior doctors had been offered a 22.3% pay rise by the government to end strike action.
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She said she would not repeat the “mistakes” of the Conservatives and would accept the independent pay review recommendations “in full”.
The move will cost an additional £9bn this year.
Over the past few days, ministers have sought to suggest the economy they inherited from the Conservatives was worse than expected, despite the Institute for Fiscal Studies thinktank warning about the poor state of public finances during the election campaign.
Ms Reeves said her government had “inherited a projected overspend of £22bn”. The measures announced today reduce that figure to £16.4bn, which be addressed in the budget that will take place on 30 October this year and a multi-year spending review.
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Among the measures that have been scrapped to save money are several transport projects, including the Stonehenge tunnel on the A303, the A27 Arundel bypass and the Restoring Our Railways scheme.
Reforms to cap social care costs to £100,000 – first presented by Sir Andrew Dilnot to David Cameron more than a decade ago – have finally been axed after years of indecision due to the £1bn cost, which Ms Reeves said were never funded or affordable.
“The inheritance from the previous government is unforgivable,” the chancellor said.
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“After the chaos of ‘partygate’, when they knew trust in politics was at an all-time low, they gave false hope to Britain.
“When people were already being hurt by their cost-of-living crisis, they promised solutions that they knew could never be paid for.
“Roads that would never be built. Public transport that would never arrive. Hospitals that would never treat a single patient.
“They spent like there was no tomorrow, because they knew that someone else would pick up the bill and then in the election – and perhaps this is the most shocking part – they campaigned on a platform to do it all over again.”
