Chancellor intends to cancel projects immediately after reviewing funding

Before the election, leading economists warned that the amounts were uneven, and that the new government would face a difficult choice between raising taxes, cutting spending, or abandoning its commitments to reduce debt in the medium term.

But the new government said it had found the situation worse than expected, describing it as “catastrophic”, with additional demands on the government treasury revealed as new ministers scrutinise their departments’ accounts.

Ms Reeves is said to be “really shocked” by some of the results.

But she would not suggest at this stage that tax increases would be necessary.

Instead, it will call on the Office for Budget Responsibility to conduct an assessment of public finances. It will also start the Spending Review, which looks at departments’ longer-term budgets.

Budgets or similar financial events will be held only once a year, and Ms. Reeves is expected to schedule her first meeting in the fall.

Insiders point out that if the chancellor had wanted to raise taxes, she would have held an emergency budget this week, but instead she will reaffirm her commitments in the election manifesto not to raise personal tax rates, including income tax.

Ms Reeves is also expected to announce that some public sector workers will receive pay rises in line with recommendations from independent pay review bodies. That means teachers, members of the armed forces and prison staff, among others, getting their salaries in line with inflation, but it also means finding the money to pay them.

The adviser is said to believe the cost of financing the deals must be balanced against the cost of disruption to the economy caused by strikes and the cost of failing to recruit and retain staff.

The Chancellor will also announce the creation of a new “Office of Value for Money” that aims to identify and recommend savings, including in the current financial year, so that “poor value spending is cut before it starts”.

Last week, UK Home Secretary Yvette Cooper said the Conservative plan to deport asylum seekers to Rwanda had cost taxpayers £700m, almost double the cost previously in the public domain.

Other departments have identified spending needs that are not covered by current budget plans. On Sunday, Environment Secretary Steve Reid said his department had found the state of flood defences was “much worse than we thought”.

The Conservative Party said the state of the public finances was clear before the election.

Former Conservative Chancellor of the Exchequer Jeremy Hunt accused the new government of “peddling nonsense”. “The books are wide open and what they show is a healthy and growing economy,” he said.

Shadow Chancellor Gareth Davies said:[Ms Reeves’] “Her words and actions about saving taxpayers money are an insult when she is secretly planning to raise taxes at the same time.”