The government’s “black hole” could be bigger than the £22bn it has claimed as cabinet ministers are being pressured to scrap projects immediately to fill it, Sky News understands.
After Labour won the election in July, Chancellor Rachel Reeves accused the previous government of leaving a £22bn shortfall in public finances they had not disclosed.
She promptly cancelled several projects, including 40 new hospitals, reforms to adult social care charges, a new Advanced British Standard qualification, and several road and train projects – and reduced the number of pensioners who will get the winter fuel allowance.
But speaking on the Politics with Jack and Sam podcast today, Sky News’ deputy political editor Sam Coates said: “One of the things I’m told is that the overall black hole could be bigger than £22bn, because don’t forget, £20bn is just the gap in this financial year alone.”
He said the government has not yet had the numbers from the Office for Budget Responsibility (OBR) but has had a rough forecast for the coming years.
“So they could have to fill an even bigger sum, these are massive amounts of money,” he added.
But because the black hole is for this year alone, it has to be filled quickly which poses the question of how to do that.
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“I’m told that to fill an immediate in-year black hole, you can’t really use tax at all because it takes too long to set it up,” Sam said.
“So there will be tax rises. But they can’t really use that to solve this problem. And welfare decisions are the same really.
“You have to look to Whitehall spending, and most of all the Treasury want to scrap projects to fill this black hole that for accounting reasons as much as anything else, will be what the Treasury is pressuring cabinet ministers to look for.
“So those front pages about mad contracts, questions about rail and road projects, all of that will come under the most pressure in this process, because that’s where they think that they can get the money from.”
Capital Gains Tax could see an increase. Pic: iStock
Politico’s editor Jack Blanchard added governments “making very quick decisions on these projects they don’t really understand have a tendency sometimes to get them horribly wrong”.
“You may see very poor, controversial decisions being made in the budget where, you think you can get away with just srapping that little thing that no one cares about,” he added.
“And then, the budget blows up in your face and it’s these stories take a life of their own and you lose control of the narrative.
“That’s what Rachel Reeves and Downing Street will no doubt be worried about.”
The autumn budget is set to take place on 30 October, with tax rises expected to be announced after Sir Keir Starmer said it will be “painful”.
Inheritance and Capital Gains tax are the most likely to face an increase, with business rates also potentially seeing a change.
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Source Agencies
