In a heated exchange that has further strained relations between the ruling Labour government and the opposition Conservatives, Chancellor Rachel Reeves has accused her predecessor, Jeremy Hunt, of misrepresenting the state of the public finances, intensifying a row over an alleged £22bn shortfall.

Reeves didn’t mince her words, asserting that Hunt “knowingly and deliberately… lied” to both Members of Parliament and the public about public spending.

“Jeremy Hunt covered up from the House of Commons and the country the true state of the public finances. He did that knowingly and deliberately,” she said. “He lied, and they lied during the election campaign about the state of the public finances.”

Hunt vehemently denied these allegations. He penned a letter to Simon Case, the cabinet secretary and head of the UK’s civil service, challenging the Labour government’s assessment.

In his letter, Hunt demanded an “immediate answer” to the “conflicting claims” that he warned could “bring the civil service into disrepute.”

Hunt argued that either the spending plans previously approved by senior civil servants were incorrect, or the document Reeves presented to the Commons was flawed.

The dispute centers on Reeves’ claims of a £22bn gap in the public finances, which led her to scrap several Conservative policies on Monday.

Among the abandoned plans were the anticipated cap on social care costs, the construction of 40 hospitals, and various road projects.

Additionally, Reeves announced cuts to winter fuel payments for 10 million wealthier pensioners, reversing a policy introduced by former Prime Minister Gordon Brown. This move is expected to save £1.5bn in the next financial year.

As a result of this decision, the number of pensioners receiving the winter fuel payment will plummet from 11.4 million to 1.5 million, with the benefit now means-tested.

Households with at least one member aged over 80 could see their payments, worth up to £300, eliminated.

The Conservatives have been quick to respond. They highlighted a letter from last autumn, written by Darren Jones, now the Chief Secretary to the Treasury, in which he questioned Hunt about potentially scrapping the winter fuel allowance for some pensioners.

In his November letter, Jones expressed concern that pensioners would be “deeply concerned” and “anxious that their incomes may be under threat from this government.”

Adding to the controversy, nearly half of the shortfall cited by Reeves, £9.4bn, stems from her decision to fully fund above-inflation public-sector pay recommendations.

Reeves Defends Scrapping Social Care Costs

Rachel Reeves also defended her decision to scrap the planned cap on social care costs, citing the necessity of making “incredibly difficult decisions.”

“What I inherited… is a gap between what the previous government said it was going to spend and what it was actually spending of £22bn so I’m in a position of having to make urgent decisions to restore economic stability and financial stability. I was determined to ensure that we got a grip of these pressures.”
Rachel Reeves

According to Reeves, an audit with Treasury officials revealed that some promises made by the previous government lacked any funding.

Among these were social care, new hospital programs, transport spending, A-level replacements, and asylum provisions.

“There are lots of difficult decisions that I had to make yesterday, decisions that I didn’t want to make, decisions that I never expected to make,” Reeves said.

“There are a lot of things that this new Labour government would like to do. But unless you can say where the money is going to come from, you can’t do them.”

Rachel Reeves

She concluded by stating that Health Secretary Wes Streeting would move forward with plans to reform social care in collaboration with the sector, emphasizing the government’s commitment to addressing these critical issues.