The UKs new chancellor set out what she called the "scale and seriousness" of the financial state of the government.
Rachel Reeves claimed the government has inherited a £22bn hole in public finances, which she said if left unaddressed would leave a 25 per cent deficit in this year's budget.
In a speech this afternoon (July 29), she told the House of Commons she would be holding a Budget on October 30, to "fix the foundations of the economy".
In a damning speech she said Office for Budget Responsibility was not aware of "overspent and unfunded promises" when it made its March forecast.
She set out areas identified in Labour's spending audit, including a projected overspend in the asylum system of £6.4bn and in transport of £1.6bn.
"Where the previous government ducked the difficult decisions, I am taking action after knowing what they did about the state of the public finances," said Reeves.
"They continued to make unfunded commitment after unfunded commitment that they knew they could not afford, putting party before country, leaving us with an overspend of £22bn this year. Where they presided over recklessness I will bring responsibility, I will take immediate action."
She said she was making the "difficult decision" to remove the winter fuel payment from those not in receipt of pension credit or other means tested benefits.
It is currently an automatic benefit for those over a certain age.
"Let me be clear, this is not a decision I wanted to make, nor is it the one that I expected to make, but these are the necessary and urgent decisions that I must make," said Reeves.
"It is the responsible thing to do to fix the foundations of our economy and bring back economic stability."
To address the shortfall, Reeves said government departments would be asked to make savings of £3bn and each would be asked to make 2 per cent of savings on back office costs.
The Advanced British Standard, announced by Rishi Sunak in 2023, has been scrapped as it was forecast to cost £200mn but had no money set aside for it.
A £150mn investment fund, also announced last year, has been dropped, as has the Rwanda scheme, which Reeves said would save £800mn this year.
Reeves repeated Labour's manifesto pledge that the party would not increase national insurance or the rates of income tax or VAT.
However, she said further details on closing tax loopholes and "clamp down on tax avoidance to ensure we bring in that money as quickly as possible".
'Changing the fiscal framework'
Reeves set out a number of changes to the way the finances of the UK government are handled.
She said a new Office for Value for Money would be created.
As well as legislation to avoid a repeat of the disastrous Liz Truss mini-budget, it includes requiring the Treasury to share with the Office of Budget Responsibility its assessment of immediate public spending pressures.
