The Chancellor was so shocked when she received the briefings from Treasury officials that she had no choice but to scrap her election commitments. It was so serious that it was about to crash the markets. It had to be fixed so urgently that the winter fuel allowance had to be cut, and we will need huge tax rises in a ‘Horror Budget’ next month. The Chancellor Rachel Reeves and the Prime Minister Sir Keir Starmer have made the ‘black hole’ in the public finances central to their government agenda. But hold on. In the kind of twist that would puzzle even the most distinguished astro-physicist, when you look closely it turns out that the ‘black hole’ doesn’t exist.
In reality, the ‘black hole’ is just a crude political device
Given how central it is to everything the government is doing, and the precision over its size, you would imagine that Reeves had some detailed documentation to back up her claims. And yet when the Financial Times submitted a freedom of information request for the charts and paperwork, it was declined. The details would be published only in accordance with agreed timelines ‘to allow the relevant officials time to complete the preparation of the information to ensure it is accurate and correct prior to publication.’
Seriously? We might have assumed that something quite so serious would have been costed in detail. Or perhaps the Office for Budget Responsibility might have been asked to double-check the books, and make sure that it was as perilous as it is being claimed. But no. The Treasury needs more time to make sure the sums actually do add up to £22 billion as Labour ministers keep insisting.
Of course it is not hard to understand why. In reality, it doesn’t exist. On closer examination, it turns out that £9.4 billion can be accounted for by Reeves’s decision to award the public sector big pay rises. And another £8.6 billion was accounted for by ‘normal reserve requirements’.
None of that should have been surprising. There are always spending pressures on every government, especially when it has been in opposition for a long time. That’s why the Treasury exists. But there was no real urgency. In reality, the ‘black hole’ is just a crude political device. It exists purely to give the government an excuse for abandoning its election promises not to raise taxes, and to provide a pretext for cutting welfare payments that it does not approve of. The trouble is, if it turns out to be completely made up it will shred Reeves’s credibility – and once that is lost it is very hard for any Chancellor to recover it.
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