The newly appointed UK Chancellor of the Exchequer, Reeves, told Parliament that her Conservative predecessor left a fiscal deficit of £ 21.9 billion (approximately $28 billion) and announced an immediate reduction of £ 5.5 billion in spending.

The new UK finance minister will cut spending

Reeves plans to cut spending by an additional £ 8.1 billion in the next fiscal year and has promised to introduce more measures when the comprehensive budget is announced on October 30th. At that time, the newly elected Labour government will need to make "difficult decisions", including tax decisions.

Part of the cost comes from Reeves' decision to raise salaries for public sector employees, totaling £ 9.1 billion, which was made after recommendations from an independent pay setting body that she said the Conservative Party had long ignored.

Reeves said that the public finance situation is unsustainable, and if left unchecked, it will pose a threat to economic stability. Therefore, difficult decisions must be made now to further save expenses within the year.

Reeves has taken over a mess, with weak economic growth in the UK, public sector net debt reaching a new high since the early 1960s, and tax burdens on the verge of reaching a nearly 80 year high.

The previous government also faced strikes in multiple areas of the public sector, and Reeves stated that she will accept proposals to raise wages for workers such as teachers and healthcare workers at a rate higher than the inflation rate.

Reeves accused the former Conservative government of concealing the true situation of government spending in a statement and stated that she needs to make difficult decisions to prevent this year's budget deficit from expanding by 25%. Critics believe that this is paving the way for future tax increases.

She has cut off a series of projects such as road construction and railway repairs, stating that she will re-examine a plan to rebuild the hospital and set an ambitious goal for the government department to squeeze out over £ 3 billion from the budget.

She also stated that annual heating payments to high-income pension recipients will be discontinued, resulting in an annual savings of approximately £ 1.5 billion.

The new government will also implement tax increases

After taking office, Reeves commissioned a review of public finance and used her speech in Parliament to attack the previous government, which was led by Sunak, Truss and Johnson at different stages.

Reeves said, "The solutions they promised, they knew they would never find funding support: roads that could never be built, public transportation that could never be reached, hospitals that could never treat a patient

The Conservative Party dismissed her accusations as an excuse for the Labour Party to raise taxes.

Hunter, a former Conservative Chancellor of the Exchequer, said, "Today's series of actions are not driven by economic considerations, but by political considerations. She wants to blame the previous Conservative government for her long planned tax increases and cancellation of projects

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said that some funding pressures do seem to be greater than expected. He said, "Some specific details are indeed shocking and have raised some difficult questions for the previous government

The non partisan Budget Responsibility Office in the UK is responsible for reviewing the government's tax and spending plans. The office stated that it will review how Hunter's budget for March was prepared and called it a serious issue.

Reeves emphasized that she intends to uphold her party's campaign promise not to increase the tax rates of income tax, value-added tax, and other major taxes.

Any other tax related changes will be announced in the official budget statement in October, which Reeves said will include a new set of non-negotiable fiscal rules.

Based on the above information, it can be seen that the new UK government is committed to fiscal reform after taking office, which will help improve the economic situation, boost market confidence, and support the pound. Investors need to keep an eye on this.

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