Jeremy Hunt is expected to raise taxes, cut public spending and rein in energy support to fill what the Treasury has called an “eye-watering” £54bn black hole in the nation’s finances.
In his Autumn Statement this morning, we can “expect the chancellor to talk about the need to balance the books and fill a fiscal black hole”, wrote Nick Eardley, the BBC’s chief political correspondent.
However, some economists have questioned the Treasury’s £54bn calculation because it is created by arbitrary fiscal rules set by the government.
What did the papers say?
The black hole is “the gap, the space, between future tax revenues and public spending, which, if big enough to bust the fiscal rules, has to be tackled”, wrote David Smith, economics editor of The Sunday Times.
However, there was “no hint” of this “fiscal mess” when Rishi Sunak campaigned for the Tory leadership over the summer, he added. The former chancellor promised further tax cuts because, “on the face of it, the public finances were in good shape”.
The Office for Budget Responsibility had warned in March that the chancellor’s fiscal headroom “could be wiped out by relatively small changes in the economic outlook”. Since then, a drop in GDP and surges in interest rates and inflation have caused a “shift in the OBR’s assessment of the public finances”, wrote Smith.
By July, the £30bn of headroom had been lost because of higher inflation, higher interest rates and slowing economic growth. Some have pointed the finger of blame at Liz Truss and her controversial mini-budget, but although she has “undoubtedly made a bad situation worse” she is “not to blame”, wrote Joel Hills, business and economics editor at ITV News.
The problem, he argued, is that the UK has been “hit by a series of economic shocks: Brexit, the pandemic and the war in Ukraine”, while “inflation is rampant, interest rates are rising and the labour market is tight”.
Meanwhile, “left-of-centre economists” have questioned the very idea of a “measurable ‘black hole’ in the public finances”, said The Guardian. It argued that “its existence is only created by whatever fiscal rules the government has set itself” and that estimates …read more
Source:: The Week – All news