Rachel Reeves warns UK finances are in worst shape since WWII

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Rachel Reeves has warned Britain's new Labour government has inherited the worst economy since World War II and has ordered the Treasury to investigate previous spending by the Conservatives.

Britain's Chancellor of the Exchequer has laid the groundwork for tough choices on public finances this year, vowing to prioritise growth and allow housing developments and offshore wind farms to be built in her first major speech as prime minister.

We face a legacy of 14 years of chaos and economic irresponsibility, Reeves said Monday, so over the weekend I directed Treasury officials to provide an assessment of our spending legacy so that we can understand the full scale of the challenge.

The Treasury's analysis of the Rishi Sunak government's financial inheritance is due to be released before Parliament's summer recess this month.

Reeves said the review would pave the way for tough choices in the fall budget, which is expected to be released before lawmakers head out for the summer break, possibly involving spending controls or tax increases.

Reeves said what he had seen over the past 72 hours had only confirmed his earlier warnings that whoever wins the general election will inherit the worst situation since World War II.

The Conservatives, who argued during the election campaign that a Labour government would surprise taxpayers with a rise, argued the review would help Reeves justify tax increases in the autumn budget.

A former Conservative minister said full details of public spending were already public, either through forecasts from the Office for Budget Responsibility or published spending estimates approved by parliament.

That's just a pretext, the former minister said. That's what they said they would do when they said we were going to raise taxes.

A source close to Reeves added that the process allows the finance minister to update Congress on the state of the economy, and that it is not a budget or a comprehensive spending review or anything like that.

Reeves, who was appointed by Sir Keir Starmer after Labour’s landslide victory last week, declared that Britain now had a stable government that would work with business. She promised to make Britain a safe haven for investment.

Reeves said her bid to boost economic growth would include reforming Britain's rigid planning system, adding that her party had been elected with a mandate to get things done and build Britain back up.

She reiterated Labor's goal of building 1.5 million new homes over the next five years and set out measures including reforming the national planning policy framework by the end of the month.

She also said mandatory housing targets would be restored and the effective ban on offshore wind farms in the UK would end.

Reeves added that the government had already decided to intervene in two planning appeals for data centres and would seek to unblock a site for a large housing development that had been halted.

The government will also review the boundaries of green belts surrounding major cities to allow more buildings to be built in protected areas, despite their lower quality.

Reeves pledged to take a firm stance in developing the plan, saying, “We will always say 'no' and will not surrender to the status quo in the face of compromise.”

suggestion

Neil Jefferson, chief executive of the Home Builders Federation, welcomed the return of local government housing targets. He said we can only build if we plan effectively and local authorities take responsibility for the housing needs of their communities.

But Jefferson said the government should release 160,000 homes that are off the market because of environmental regulations and encourage more construction by providing assistance to new homebuyers.

Reeves added that he had received a report from former Bank of England governor Mark Carney on how Labor's planned $7.3 billion national wealth fund could be used to fund growing industries.

She said the next steps would be announced soon.

Asked how the burden on public finances could be reduced, Reeves said the Bank of England had no intention of changing the way it pays interest on commercial banks' reserves.

There have been suggestions that the interest rate on reserves could be cut to provide more cash for public spending.

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