LONDON: Britain’s Finance Minister Rachel Reeves on Monday announced spending cuts worth 13.5 billion pounds ($17.3 billion) over the next two years to help plug what she said was a 22 billion pound overspend caused by the previous government. Reeves also said she had accepted independent recommendations for public sector pay increases.

In a statement seen by critics as an attempt to pave the way for future tax rises, Reeves accused the former Conservative government of covering up the true state of government spending and said she needed to make difficult decisions to prevent the budget deficit ballooning by 25 percent this year.

“The scale of this overspend is not sustainable. Not to act is simply not an option,” Reeves told parliament. Elected to run the world’s sixth-largest economy in a landslide victory on July 4, Labour has spent much of its first three weeks in power telling voters that things are worse than expected in almost every area of public policy.

Reeves commissioned the review of the public finances upon taking office and the headline finding of a funding shortfall had been widely reported in the days preceding her speech. The Conservatives dismissed her accusations as a pretext for Labour to raise taxes. Some economists have also expressed scepticism, saying Labour could have foreseen most big pressures on spending before taking office.

Labour has stressed that it intends to stick to its election campaign commitments not to raise the rates of income tax, value-added tax and other main taxes. Any tax changes would come in the formal budget statement later this year.

British public sector workers such as teachers and doctors are set to receive inflation-busting pay rises worth 9 billion pounds ($11.54 billion) that will pressure the public purse but help avoid disruptive industrial action, the government said on Monday.

The new Labour government said it would make cuts to public spending in other areas, finance minister Rachel Reeves said as she blamed the previous Conservative administration for covering up the scale of the black hole in the public finances.

“I have today set out our decision to meet the recommendation of the pay review bodies, because the previous government failed to prepare for these recommendations in their departmental budgets,” Reeves told parliament as she announced the pay rises. “They come at an additional cost of 9 billion pounds this year.

But the pay rises, based on the advice of independent pay review bodies, also seek to balance the pressure on public finances with the need to curb industrial unrest and address staff retention. Governments are not bound by the review bodies’ recommendations although they have usually accepted them.

Strikes by doctors, nurses, teachers and civil servants over pay in the last two years have heaped pressure on vital public services including the state-funded NHS. The Trades Union Congress, Britain’s umbrella union body, warned in the run-up to this month’s election of public sector strikes if the new government did not sufficiently raise workers’ pay.

Reeves said she would axe universal winter fuel payments for pensioners, saying they will now only go to those who receive welfare support. Reeves said this would better target support for heating costs at those who need it, while all pensioners will still benefit from the government’s commitment to pension support. The rule change will apply to those in England and Wales, as the policy is handled separately by the governments in Scotland and Northern Ireland.

Reeves also said on Monday the government was scrapping plans to build a tunnel at Stonehenge as part of efforts to cut costs. The 1.7 billion pound ($2.2 billion) scheme, which included a new dual road with a two-mile tunnel beside Stonehenge, was aimed at hiding a nearby main road that has long blighted the mysterious prehistoric circle of stones in southern England. Stonehenge, one of the world’s most famous prehistoric monuments, includes a 5,000-year-old ditch and a Neolithic stone circle with early Bronze Age burial mounds nearby. It is a UNESCO World Heritage Site.

Some archaeologists and local residents opposed the project, saying the tunnel was too short and would damage the archaeological surroundings of Stonehenge. — Reuters