Reeves set to unveil £20bn public finances black hole

Rachel Reeves is set to unveil a black hole in the public finances of around £20bn, signalling that tax rises could be on the way.

- DAVID MADDOX

The chancellor will on Monday set out the results of the spending audit she ordered Treasury officials to produce. The findings appear to confirm concerns raised during the election campaign by the influential Institute of Fiscal Studies (IFS), which accused the main parties of a "conspiracy of silence" in not addressing the reality of public finances.

Asked by BBC Radio 4's Today programme whether the black hole is a surprise, IFS director Paul Johnson said: "I don't think that is really credible at all. There should not be a sense of surprise there is a big issue here."

He pointed out that cuts in recent years and the way public sector pay has lagged behind the private sector meant that it was clear that public services would need investment. He warned: "The manifesto words [from Labour] 'no new taxes on working people', means that there can be no tax rises at all."

Ms Reeves and Labour spent much of the election denying claims by the Tories that they would increase taxes by around £2,000 per household but now there could be a series of hikes to try to plug the gap. In particular, council tax and capital gains tax are thought to be on the radar for increases after Labour refused to rule out raising them during the election.