There is no £22bn ‘black hole’ in the UK’s finances – that is just government and media scaremongering.

If you think I’m wrong, just remember Boris Johnson’s government spent £37 billion over two years on its failed Covid-19 ‘test and trace’ system – and have you ever seen major efforts to recover that money?

No, you haven’t.

The fact is, a £22 billion in-year deficit in government finances is likely to correct itself over time – especially if the government invests in improvements to public services and in the economy as a whole, because that will bring in more tax revenue.

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Simon Wren-Lewis explained the situation in his latest Mainly Macro column:

Journalists are obsessed by what they call black holes in the public finances. The term black hole is mediamacro for a gap between a forecast for the government’s deficit and what the government’s chosen fiscal rule says that number should be. This black hole is the slender reed on which to write speculation about what a future budget may contain in the way of tax or spending changes.

Understandably, people tend to care much more about tax increases or spending cuts than black holes. Journalists know this, which is why the ridiculous term black hole is used in the first place. It is designed to transform what is in reality a highly uncertain forecast about budget arithmetic related to something largely artificial into a number that readers should regard as very important and potentially even dangerous. Of course it is neither very important nor dangerous.

If you’re still not convinced, bear this in mind:

A one per cent wealth tax on the richest one per cent of citizens in the UK would raise £25 billion in a single year, filling in Reeves’s “black hole” with billions to spare.

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