On black holes, fiscal discipline and investment-led growth
Soundings - ISSN 1362-6620
Volume 2024 Number 88
On black holes, fiscal discipline and investment-led growth
David Purdy pages 29‑40
DOI: 10.3898/SOUN:88.02.2024
Abstract
Within days of taking office, the Starmer-led Labour government commissioned a Treasury audit of the public finances. Three weeks later, the Chancellor, Rachel Reeves, revealed that, relative to what it had budgeted for in March, the previous government had overspent by £22 billion. Describing this fiscal deficit as a ‘black hole’, she announced that she intended to plug it in her first autumn budget. In the meantime and as an earnest of intent, she proposed to save an estimated £1.4 billion by removing entitlement to the winter fuel allowance from all but the poorest state retirement pensioners. Predictably, the announcement provoked a storm of protest. Cynics suggested that the furore was welcomed by a government which regarded fiscal discipline as essential to establishing a reputation for competent economic management and securing the confidence of business; and the Chancellor’s tough stance may also have pleased the Treasury. Debate about the approaching autumn budget subsequently focused almost entirely on how to fix a relatively minor spending overrun. In what follows, I review the intellectual and historical background to the current wrangling and critically examine Labour’s longer-term fiscal strategy for revitalising the UK economy.
To cite this article
David Purdy (2024) On black holes, fiscal discipline and investment-led growth, Soundings, 2024(88), 29-40 . https://doi.org/10.3898/SOUN:88.02.2024