LONDON — Britain’s new left-leaning government said Sunday that the nation is “broke and broken,” blaming the situation on its predecessors ahead of a major speech on the state of the public finances that is widely expected to lay the groundwork for higher taxes.
In a sweeping assessment three weeks after taking power, Prime Minister Keir Starmer’s office professed shock at the situation they inherited after 14 years of Conservative Party rule, while releasing a department-by-department analysis of the perceived failures of the previous government.
The critique comes a day before Treasury chief Rachel Reeves is expected to outline a 20-billion-pound ($26 billion) shortfall in public finances during a speech to the House of Commons.
“We will not shy away from being honest with the public about the reality of what we have inherited,’’ Pat McFadden, a senior member of the new Cabinet, said in a statement. “We are calling time on the false promises that British people have had to put up with and we will do what it takes to fix Britain.”
Starmer’s Labour Party won a landslide election victory earlier this month following a campaign in which critics accused both major parties of a “conspiracy of silence” over the scale of the financial challenges facing the next government.
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Labour pledged during the campaign that it wouldn’t raise taxes on “working people,” saying its policies would deliver faster economic growth and generate the additional revenue needed by the government. The Conservatives, meanwhile, promised further tax cuts in the autumn if they were returned to office.
As proof that the previous government wasn’t honest about the challenges facing the country, Starmer’s office pointed to recent comments from former Treasury chief Jeremy Hunt confirming that he wouldn’t have been able to cut taxes this year if the Conservatives had been returned to power.
Those comments came in an interview with the BBC in which Hunt also accused Labour of exaggerating the situation to justify raising taxes now that they’ve won the election.
“The reason we’re getting all this spin about this terrible economic inheritance is because Labour wants to raise taxes,” Hunt said on July 21. “If they wanted to raise taxes, all the numbers were crystal clear before the election. … They should have levelled with the British public.”
The government on Sunday released an overview of the spending assessment Reeves commissioned shortly after taking office. She will deliver the complete report to Parliament on Monday.
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Those findings led the new government to accuse the Conservatives of making significant funding commitments for this financial year “without knowing where the money would come from.’’
It argued that the military had been “hollowed out’’ at a time of increasing global threats and the National Health Service was “broken,’’ with some 7.6 million people waiting for care.
And despite billions spent to house migrants and combat the criminal gangs ferrying migrants across the English Channel on dangerous inflatable boats, the number of people making the crossing is still rising, Starmer’s office said. Some 15,832 people have crossed the Channel on small boats already this year, 9% more than during the same period in 2023.
“The assessment will show that Britain is broke and broken — revealing the mess that populist politics has made of the economy and public services,” Downing Street said in a statement.
The quandary the government finds itself in should be no surprise, said Paul Johnson, the director of the Institute for Fiscal Studies, an independent think tank focused on Britain’s economic policies.
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At the start of the election campaign, the institute said that the U.K. was in a “parlous fiscal position” and the new government would have to either raise taxes, cut spending or relax the rules on public borrowing.
“For a party to enter office and then declare that things are ‘worse than expected’ would be fundamentally dishonest,” the IFS said on May 25. “The next government does not need to enter office to ‘open the books.’ Those books are transparently published and available for all to inspect.”
The United States is launching a new initiative to help South American nations disrupt illicit activities that harm the Amazon rainforest, Treasury Secretary Janet Yellen announced Saturday in Brazil.
“Across the Amazon, criminal organizations and individuals are motivated by the potential for financial gain to illegally harvest plants, minerals and wildlife,” Yellen said in Belem, a city in northern Brazil surrounded by swaths of dense jungle.
She said these “nature crimes” generate hundreds of billions of dollars each year and “often entail misusing and abusing the US financial system.”
Under the initiative, the US Treasury will boost coordination efforts by hosting “follow the money” trainings for partner nations, enhancing information sharing and supporting joint investigation, Yellen said.
The project will coordinate efforts among the United States, Brazil, Colombia, Ecuador, Guyana, Peru and Suriname.
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“We will also consider other enforcement actions, including sanctions if appropriate, to hold illicit actors accountable and disrupt their activities,” Yellen said in Belem.
The capital city of Para state is set to host the COP30 climate conference in 2025.
The Amazon, the world’s biggest rainforest, covers nearly 40 percent of South America. In the last century it has lost about 20 percent of its area to deforestation, due to the advance of agriculture and cattle ranching, logging and mining, and urban sprawl.
A finance guru who recommended people prepare to live until they’re 90 revealed he’s been diagnosed with a shocking health condition.
British journalist and author, Jonathan Clements, 53, shared he was diagnosed with an intense form of lung cancer that has spread to his brain and other parts of his body.
In a June blog post on his website Humble Dollar, Clements detailed the moment he found out he may only ‘have just a dozen okay months’ ahead of him.
Titled ‘The C Word,’ Clements explained that he went to an urgent care clinic for balance issues, but by the end of the day, he ended up in the intensive care unit with his reality staring right at him.
He previously urged savers to follow a three-part system, including saving as much money as possible to benefit you later in life, avoid cashing in on Social Security before 70, and to strongly consider immediate fixed annuities.
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British journalist and author, Jonathan Clements, 53, revealed he was diagnosed with an intense form of lung cancer that has spread to his brain and other parts of his body in June
Although he might not be able to follow his own advice, Clements told The Seattle Times he doesn’t regret much, but knows that he’s ‘definitely on the clock here.’
‘I have no desire for HumbleDollar to become HumbleDeathWatch. But my prognosis is not good,’ he wrote.
‘I’ve had three brain radiation treatments and I started chemotherapy yesterday, but these steps are merely deferring death and perhaps not for very long.
‘But as best I can gather, I may have just a dozen okay months ahead of me.’
He added that the last cigarette he smoked was in 1987 when he was 24-years-old, and that his diagnosis is believed to be the result of ‘a defective gene.’
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Clements, who worked as a personal finance columnist for The Wall Street Journal for about 20 years, said that he has now turned his attention to writing about not just personal finance, but ‘implications’ of his rare and incurable disease.
Throughout his career as a journalist, Clements saved as much as he could before he took a job at Citibank in 2008.
It was there that he doubled his income. After working there for six years, the financial expert managed to save about 30 percent of what he made, The Seattle Times reported.
He posted about his shock diagnosis in a piece title ‘The C Word.’ In it, he describes not only how he discovered his disease, but how he plans to use it to inspire and help others
He told the outlet that getting married was also a smart financial move, as his wife and mother of his two kids works in academia- which offered his children partial tuition benefits.
Through it all he continued to live a frugal life so he could save as much as possible for retirement.
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‘I got to call the shots. I got to be as frugal or lavish as I wanted,’ he admitted.
He also noted that deciding to live in an inexpensive house helped him save for his future self.
‘Those initial decades in a mediocre house in the New Jersey suburbs is what set me up,’ Clements said.
Although he has achieved part one of his master financial plan, Clements might not be able to finish out the second and third steps.
Since being faced with cancer, Clements has posted several financial pieces in relation to his terrifying diagnosis.
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In a recent blog post, he compared his sudden diagnosis to managing money.
‘We’re laser-focused on certain risks. Stock market crashes. Auto accidents. Our home burning down. Big medical bills. Losing our job. Hefty home repairs,’ he explained.
Clements then questioned if risks like these should be the ones we really need to be worried about.
Before founding HumbleDollar, Clements worked as a personal finance columnist for The Wall Street Journal for about 20 years
‘I don’t want readers to obsess about risk. But I would encourage folks to build financially resilient lives and to avoid big assumptions about the future,’ he explained.
‘Risk has now arrived for me, and it’s taken a form I never imagined. Fortunately, I’m well-prepared financially, thanks to health insurance and a plump nest egg.’
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Clements founded HumbleDollar at the end of 2016, and besides writing for the blog, he is also the editor.
He is also on the advisory board for the country’s biggest independent financial advisors, Creative Planning.
The successful financial mentor was born and raised in England, but he now lives with his wife Elaine in Philadelphia, surrounded by his kids and grandchildren, according to his website bio.
The meeting was only one-third of the way through, but the exasperation in the air was palpable.
“There’s a level of frustration that’s happening throughout the room, and I don’t mean just up here, I think it’s everybody,” said South Pasadena Councilmember Janet Braun, who serves as the City Council’s liaison to the city’s Finance Commission.
Braun’s comments at this week’s Finance Commission meeting came as tensions continue to mount over the proposed fiscal year ’24-’25 budget, which the South Pasadena City Council is set to adopt next Wednesday, July 31.
South Pasadena City Hall is seen on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
Police pass the Fair Oaks Pharmacy, a South Pasadena landmark since 1915, on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
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People pass the Fair Oaks Pharmacy, a South Pasadena landmark since 1915, on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
South Pasadena City Hall is seen on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
South Pasadena City Hall is seen on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
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South Pasadena City Hall is seen on Friday, July 26, 2024. The city is facing financial challenges after an analysis in the beginning of this year projected a $3.7 million deficit. (Photo by Sarah Reingewirtz, Los Angeles Daily News/SCNG)
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Despite efforts to finalize the financial document, its adoption has already been delayed by about a month after city officials expressed concerns about discrepancies on June 27.
While the Finance Commission meetings are meant to solve these issues, recent events suggest the budget may face further delays, adding to uncertainties about the city’s financial outlook after it narrowly avoided a $3.7 million deficit.
“Based on an impasse between the Finance Commission and the Finance Director during its two commission meetings on July 16th and July 23rd, I am not sure if the Finance Director can close the gap,” Mayor Evelyn Zneimer said in an email on Thursday, July 25.
Zneimer expressed concerns about the “true numbers of the revenues and expenditures,” noting that the Finance Department has not reconciled the city’s monthly bank statements since February 2024.
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“If the Council is not satisfied with the explanation from the Finance Director and the Finance Commission does not recommend adoption, then we might have to postpone the July 31st meeting to the next regular council meeting,” she said.
South Pasadena Finance Director John Downs announced his retirement in April but was brought back on a temporary basis to finalize the FY 24-25 budget, city officials said.
When reached by the phone on Thursday, July 25, Downs, citing a busy schedule, declined the interview at the time. However, during the Tuesday, July 23, Finance Commission meeting, Downs defended his approach. He also said the staff will present an updated budget document to the City Council next week.
“That will be presented to both of you at the time,” he told the commissioners. “Everyone here has received a copy of the punch list, so everybody has a list of the punch list, those things will be incorporated into the document.”
But the commissioners expressed concerns that they won’t have a copy of the budget report before next week’s meeting.
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“My assumption was that these working sessions last week and this week would be included in a revised document. John was working under a different set of assumptions. I’m glad it finally came out,” Finance Commission Chair Peter Giulioni Jr. said.
According to the proposed FY 24-25 budget, as of July 1, 2024, the general fund balance is estimated to be $22 million. For FY 24-25, the city expects to receive $41.2 million in revenue and spend $39.9 million.
South Pasadena has faced a tumultuous year, beginning with budgetary missteps that included a projected $3.7 million deficit.
During a joint City Council and Finance Commission meeting on Feb. 21, a third-party consultant, NHA Advisors, LLC, estimated that the city’s expenses would outpace its general fund revenues over the next five years, with deficits ranging from $1.8 million this fiscal year to $3.9 million in FY 28-29.
In response to this dire forecast, Braun recommended forming an ad hoc committee “to address the immediate financial and operational situation.”
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According to her, the city’s financial problems began even earlier with the City Council’s adoption of the FY 23-24 budget in June 2023, which included a $2 million deficit.
That budget was approved on the condition that the Finance Commission would work with staff to understand the negative fund balances and provide a five-year projection, she said. The City Council received this projection on Feb. 21, along with a mid-year budget report.
“Accompanying that report was the mid-year budget report, which projects not the $2 million deficit originally approved and on which the five-year projections were built, but maybe that is incorrect, I’ve learned,” Braun said. “But an actual deficit for the current year of $3.7 million. We have been delivered a financial nuclear bomb.”
She also criticized what she described as “the staff’s resistance to work with the Finance Commission over the past several months, despite the direction from the City Council last June.”
Following Braun’s alarming assessment, the ad hoc committee was formed. It consisted of Zneimer, Braun, Giulioni, and Finance Commission Vice Chair Sheila Rossi.
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However, this committee was nearly dissolved after complaints from former Finance Commissioner Ed Elsner, who argued that the committee violated Brown Act because its discussion and formation were not listed on the Feb. 21 meeting agenda.
During a meeting on March 20, Councilmember Jon Primuth argued that the committee “had a very strong political agenda.” Councimember Michael A. Cacciotti described the committee as “a duplicative body” and “a waste of time, a waste of our resources”.
The City Council subsequently voted 3-2 against reauthorizing the committee, with Primuth, Cacciotti and Councilmember Jack Donovan voting against reauthorizing, Zneimer and Braun voting in favor.
But public concern over the deficit projections grew, prompting the City Council to reinstate the committee on May 1. The panel decided that the committee would be resurrected after July 1, by which time the FY 24-25 would’ve been adopted.
Nevertheless, that plan also fell short.
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While the City Council had hoped to adopt the FY 24-25 budget before the current fiscal year ends on June 30. However, during a June 27 meeting, the panel, citing discrepancies in the numbers in the financial report, voted to go with the Finance Commission’s recommendation to delay the budget adoption.
Instead, the panel approved a resolution of continuing appropriations, authorizing the city to use appropriations for ongoing projects for 60 days or until the adoption of the budget, whichever comes first.
Using continuing appropriations could lead to administrative inefficiencies, restricted financial management and uncertainty for long-term planning, according to a staff report. However, the pros of this method are that it could help avoid government shutdown, maintains the status quo and provides more time for budget negotiations.
According to a staff report, the proposed FY 24-25 budget is balanced and shows a projected surplus. In addition, the previously projected $3.7 million deficit was mitigated by the discovery of unused funds.
But there are several problems with the proposed budget, Rossi said in a recent interview.
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“I don’t really have a lot of trust in the numbers that are in the budget, because we still haven’t received the third quarter financials,” she said. “They gave us the third quarter summary, but it turns out that they haven’t finished their bank reconciliations for February. “
Rossi also expressed concerns that the revenue projections in the proposed budget are overstated by $700,000 to $900,000 based on the projections from two third party consultants the city hired.
Meanwhile, the city has hired LSL finance consultants to help with back-office accounting and reconcile the bank statements, the mayor said.
“Hopefully LSL could clarify the true numbers so that by August 21, we might be able to adopt the budget subject to any conditions that the Council might impose,” she said. “But then I have the other four Councilmembers to weigh in on the situation and I don’t know where they stand. So everything will depend on how the meeting will go on July 31.”
The city has also been dealing with a string of staff departures, which culminated in the stepping down of former City Manager Arminé Chaparyan on June 24. She received a lump-sum severance benefit in the amount of $307,500, $1,727.10 of unused management leave and a cash payment for all properly accrued and unused vacation time.
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On Friday, July 26, the City Council approved a resolution appointing Donald Penman to serve as interim manager. Penman previously served as city manager for the cites of Arcadia, San Fernando and Baldwin Park.
He will start on Monday, July 29.
Rossi said “nothing is at stake” if the City Council doesn’t passes the budget next week.
But one thing was expected: A long night.
“The best we can do is to create a punch list and that we all need to bring our pajamas and cots on the evening of the 31st, that it’s going to be an extraordinarily long evening, if we are going to ask the City Council to either reject or accept each line item that we’re discussing right now,” Giulioni said.
