The £22bn Black Hole Was Obvious To Anyone Who Dared To Look

6th August 2024

"Frankly, nobody comes out of this smelling of roses". Paul Johnson writes for the Times.

Yes, the Tories left Labour a mess to clear up but it's disingenuous for Rachel Reeves to claim that taxes might have to rise to fund predictable public sector pay rises

A week on from Rachel Reeves's big reveal that there is a £22 billion "black hole" in the nation's finances, what are we to make of the claims and counterclaims and, more importantly, what can we learn?

Frankly, nobody comes out of this smelling of roses. Not the Conservatives who really did leave a lot for the new government to clear up, and were not honest about the challenges ahead. Not Labour, which knew the broad outline of these challenges, but refused to confront them in its manifesto and pre-election statements. And not our institutional framework, which meant that some of the immediate problems were allowed to fester and were obscured in the official data.

Reeves ran through a host of issues, but there were two big ones. The first was the lack of cash available to meet public sector pay settlements of any more than about 2 per cent. The second was that nearly all the estimated £6.4 billion cost of supporting asylum seekers was unfunded, in the sense of not appearing in the Home Office’s departmental budget.

Read the full article at IFS HERE