Is Rachel Reeves’s claim that, since arriving at the Treasury just three weeks ago, she has discovered large, unfunded liabilities in the public finances a transparent political manoeuvre, so that she can blame tax rises and spending cuts on the Tories? Well, yes. But that doesn’t mean she’s wrong.

It’s true that most economists – including me – pointed out during the election campaign that the then government’s plans for tax and spending did not add up, and that public service expenditure plans in particular were, in the words of the chair of the Office for Budget Responsibility (OBR), a work of fiction. And that therefore Labour’s commitment to (broadly) stick to those plans, while ruling out broad-based tax increases, was at best a hostage to fortune.

But it’s also true that claims from the Conservatives and even the Institute for Fiscal Studies that the “books were open” and that Reeves therefore has no excuses, misses the point. Sure, we knew the Rwanda scheme and the government’s refusal to process asylum claims was a hugely expensive exercise in performative cruelty. But we didn’t know how expensive. Sure, we knew that teachers and NHS staff pay would have to go up by more than planned, not just or even mainly because of the threat of strikes, but because otherwise staff would simply vote with their feet. But we didn’t know what level of extra pay rise the pay review bodies would say was required. Sure, we we knew that, as the environment secretary revealed on Sunday, there were huge holes – both real and metaphorical – in our flood defences. But not how big they were. The list goes on.

So the “hole” is real enough, and it is unequivocally the responsibility of the previous government. And Reeves is also correct that means hard choices. Her first fiscal rule – that current spending should be balanced by current revenues – means that some cuts need to be made, and taxes will need to go up.

That rule makes economic sense. No chancellor could simply shrug their shoulders and say: “Sorry, we’re spending an extra £22bn this year, not because the economy has underperformed, or because of an unforeseen geopolitical crisis, but simply because of a combination of incompetence and dishonesty. But no worries, we’ll just let the deficit take the strain.”

In this context, ending the winter fuel payment, except for pensioners on means-tested benefits, is sensible. Meanwhile, the fact that cancelling Rwanda and simply processing asylum claims is estimated to save £1.4bn illustrates just how expensive, as well as immoral, Conservative policies towards refugees have been.

But what this should not mean, however, is a repetition of George Osborne’s decision to slash public investment in 2010. And here Reeves has given mixed messages. The repeated refrain, “If we cannot afford it, we cannot do it” is an almost precise, and deeply dangerous, inversion of Keynes’ famous phrase: “Anything we can actually do, we can afford.” It was the anti-Keynes mentality that gave us austerity in 2010, and ended up costing us far more, economically, financially and socially, than it saved. And this wasn’t just true about physical investment – we now know, for instance, that axing Sure Start was a false economy.

And this is where Reeves’ second fiscal rule comes in – that the debt to GDP ratio should be falling at the end of the forecast period. As one thoughtful analyst pointed out over a decade ago, such a rule generates perverse incentives without guaranteeing fiscal sustainability. Yes, that was Rachel Reeves while serving as a shadow minister under Ed Miliband.

Nor is this the fault of either the OBR or the financial markets. It is entirely within the government’s control to amend the debt rule to facilitate more investment, or other spending that will improve our economic prospects over the medium to long term. Indeed, the OBR recognises that productive public investment will boost growth and tax revenues. Nor will financial markets react badly to yet another change of the fiscal rules if the objective is to boost investment spending.

So it’s what comes next that matters. Today was, by and large, a good start. But in the autumn Rachel Reeves needs to move from patching up the holes to fixing the foundations. That will mean grasping not one but three nettles. First, reforming the debt rule, perhaps by moving to a measure of public sector net worth that takes account not just of government debt but of publicly owned assets. Second, higher taxes – and, equally important, reform and restructuring of the UK tax system so as to raise revenue and make it more growth friendly, for instance by introducing a proper land or property tax to replace the inefficient and regressive council tax. And third, costed and funded programmes to address some of our deep-seated structural challenges, from social care to transport infrastructure to child poverty. None of this will be cheap, easy or painless – but, to go back to Keynes, we can’t afford not to do it.

• Jonathan Portes is professor of economics and public policy at King’s College London and a former senior civil servant