Reeves acts to plug £22bn hole 'covered up' by Tories

Rachel Reeves has cut winter fuel payments for 10 million wealthier pensioners as she seeks to plug a £22bnblack hole in the public finances she said was "covered up" by the Conservative government, heralding tax rises in her first autumn budget.

- Pippa Crerar , Larry Elliott & Peter Walker

The chancellor also shelved the long-delayed cap on what people would pay for social care as she ignited a bonfire of Tory policies she said would be needed to close the gap, telling MPS: "If we cannot afford it, we cannot do it." Yet almost half of the shortfall, £9.4bn, was a result of her decision to fund above-inflation public sector pay recommendations in full, helping to reverse years of declining wages and see off the threat of industrial action.

Her response to a Treasury internal audit commissioned by Labour within days of taking office also paves the way for a brutal first budget on 30 October where she is expected to put up some taxes as well as cutting welfare and public spending.

"We don't want to increase taxes but we are in a position where there was a £22bn gap between the money the previous government spent and what they budgeted for, and so we are going to have to make difficult decisions," she told a Treasury press conference.

In a further sign that tough measures are being planned for the budget, the Treasury document outlining the spending pressures said that her plan for Whitehall departments to make £5.5bn of in-year savings would not be sufficient.

"The government is setting out further steps to tackle the spending pressures that remain and to take the difficult decisions necessary to secure the public finances," it added.

Jeremy Hunt, Reeves's predecessor as chancellor, said she would "fool absolutely no one" with the financial audit and accused her of a "shameless attempt" to lay the groundwork for tax rises in her autumn budget.