Rachel Reeves will blame asylum hotel bill for black hole in public finances
Rachel Reeves will next week single out a spiralling hotel bill for asylum seekers that could cost up to £10 billion a year as she pins the blame for financial pressures on the Tories.
The Chancellor will use a speech to the House of Commons on Monday to reveal the details of her “audit” on hidden public spending realities commissioned after Labour took office.
Conservatives and think tank figures are claiming that Labour figures are exaggerating their surprise at the problems in government to pave the way for tax rises in the autumn.
The Telegraph revealed that Ms Reeves is expected to say the black hole in the public finances is around £19 billion, with an early assessment pointing to that figure.
This newspaper now understands that among the “hidden” issues the Chancellor will point to will be the scale of spending forecasted to house asylum seekers in hotels, which is more than three times previously thought.
Home Office estimates show asylum support costs are set to rise to £30 billion to £40 billion over the next four years, around £10 billion a year.
That is significantly higher than previously assumed. It had been said that £8 million was being spent on hotels for asylum seekers each day, which amounts to £3 billion a year.
‘Completely uncontrolled’
One Government source familiar with plans for Monday said that the asylum hotel bill had been “completely uncontrolled” under the Tories.
Another said: “We are facing enormous asylum accommodation costs for the next year until we are able to get to the point that we can get processing up to speed. But that won’t happen overnight.”
Housing asylum-seekers in hotels, with the state picking up the bill, was a move taken under the Tories due to the surge in small boats crossing the English Channel carrying migrants to the UK.
During the election campaign, the Tories accused Sir Keir of having no detailed plan for stopping small boat crossings.
The Prime Minister has scrapped the Tories’ Rwanda deportation plan, calling it a “gimmick” and instead putting focus on “smashing the gangs” who are smuggling people on small boats.
The figure for soaring hotel bill costs could be contested by the Conservatives. It is unclear if a full breakdown of the forecast will be revealed by the Government.
Yvette Cooper, the Home Secretary, criticised the inheritance passed on by her Tory predecessors in the Home Office, including the cost of the hotel bills, earlier this week.
Ms Cooper said: “We have often warned that, frankly, it would be cheaper to put them up in the Paris Ritz. As it turns out, it would have been cheaper to buy the Paris Ritz.”
Ms Reeves’s statement on Monday comes after weeks of Labour claiming that it is facing the worst economic inheritance since the Second World War.
The claim has been fiercely contested by the Tories, now in opposition, who have said it is an exaggeration to create political space to increase tax rises in the autumn.
Jeremy Hunt, the shadow chancellor who left the Treasury earlier this month, called the claim “absolute nonsense” and said Ms Reeves “wants to raise the ground for tax rises”.
Paul Johnson, director of the Institute of Fiscal Studies, said on Friday that the Chancellor should not feel “any sense of surprise” that the public finances are in a poor state.
Mr Johnson said: “I don’t think it’s really very credible at all. In terms of the scale of the problems facing public services, lots of individuals and organisations have pointed out that public services are performing considerably worse than they were pre-Covid.
“They are performing worse than they were back in 2010. We have seen that Birmingham and other local authorities have been going bust, we know what the waiting lists are in the NHS.
“We have always known that public sector pay is a long way behind private sector pay in terms of what has happened in recent years so there shouldn’t really be any sense of surprise that there is a big issue here.
“The choice is, as ever, do you want the public services to be as good as they are, better than they are, or are you willing to see them get worse?”