Chancellor to unveil 'broke Britain' dossier - as Tories warn of tax hike on the way

Rachel Reeves is to lay bare the scale of Labour's dire economic inheritance from the Conservatives tomorrow, in a speech which could lay the ground for tax hikes and spending cuts in the chancellor's first Budget.

- ARCHIE MITCHELL

She is expected to tell parliament that Rishi Sunak's party left a £20bn black hole in the public finances, including making significant funding commitments this year with no idea how they would be paid for. The government said the assessment will show that "Britain is broke and broken" and will reveal "the mess that populist politics has made of the economy and public services". It will set the stage for "difficult decisions" to be taken "to start to rebuild the country".

But former chancellor Jeremy Hunt said the books have been "wide open", accusing Labour of "peddling fiction which is widely rejected by independent commentators". He added: "Their motive is clear: having promised not to raise taxes 50 times before the election, they now need a pretext - but trying to scam the British people so soon after being elected is a highrisk strategy doomed to fail."

It is widely expected that the dossier, which Ms Reeves commissioned in one of her first acts as chancellor, is a bid to give cover for Labour to cut spending or unveil tax increases. The party ruled out increases in VAT, national insurance and income tax during the election campaign but other measures that could be considered are changes to capital gains and inheritance tax.

Ms Reeves is following in the footsteps of former chancellor George Osborne, who used the Tories' inheritance from Labour in 2010 to paint the party as having bankrupted the country.

In a major speech, she will commission a financial forecast from the Office for Budget Responsibility (OBR) and confirm the date of the autumn Budget, which will be the first ever delivered by a woman. And while setting out the scale of the challenge to the public purse, she will promise to "fix the foundations and make every part of the country better off".