OPINION - Does Britain have a £50bn fiscal black hole? It depends who you ask

 (Ben Turner)
(Ben Turner)

A month and 60 years ago, the world almost came to an end. The Soviet Union had deployed ballistic missiles in Cuba, the United States imposed a quarantine around the island and both sides contemplated the annihilation of the other before a peaceful resolution was found. We called it the Cuban Missile Crisis.

But you don’t have to be a Marxist revolutionary to question this narrative. The placement of missiles in a sovereign country, albeit one 90 miles south of Florida, was not in itself an act of war. Indeed, the US had its own stationed in Turkey.

Therefore, the problem the US faced in October 1962, writes Jutta Weldes in Constructing National Interests, “had to be interpreted specifically as a Cuban missile crisis rather than, say, as a Cuban missile nuisance that, though annoying, demanded no US action.”

I mention this because while there are objective facts, they are still subject to interpretation and varying degrees of social construction. Take Britain’s fiscal black hole. There’s been a fascinating debate simmering away over the last few weeks not about its size or the appropriate ratio of tax rises to spending cuts, but in fact whether it exists at all.

I alluded to it in a previous newsletter. But in short, the ‘black hole’ isn’t a divine figure handed down from on high like Moses and his stone tablets. Instead, it is based on the fiscal rule the government wants to keep to – in this case, to get debt falling as a percentage of GDP over the medium term.

The BBC’s business correspondent, Andy Verity, has been plugging away at this point for some time, essentially posing the question: is austerity a political choice or an economic necessity?

If it’s a choice, then one could reasonably ask whether now – as the UK is set to enter what the Bank of England forecasts to be the longest recession on record, and with public services grinding to a halt – is the right time to cut spending and raise taxes in order to meet an arbitrary debt to GDP figure? Might this instead be a massive overcorrection following the market reaction to the mini-budget, based on forecasts that change depending on the mood of the forecaster?

Not so fast says Tim Pitt, one-time advisor to former chancellor Philip Hammond. He argues that we’ve essentially just come through a fiscal credibility crisis, and that downplaying the role and questioning the judgement of the forecasters is what helped get us into this mess in the first place. He also points out that the fiscal target itself is still pretty darn loose.

The government has already decided. Rishi Sunak and Jeremy Hunt believe they cannot risk a repeat of the summer, when borrowing costs spiked and the government dissolved. They know the Autumn Statement will make the recession worse and further depress living standards. That they’re resolved to do it anyway speaks not only to the influence of the markets, but the awesome power of how one frames a question. I guess it comes down to whether you think Britain faces a fiscal crisis, or merely a nuisance.

Elsewhere in the paper, arts correspondent Robert Dex talks to the London institutions fighting back over huge cuts to funding in the capital.

In the comment pages, Emily Sheffield warns Sunak that competence will only take him so far, and says we can’t blame Matt Hancock for everything. While Paul Flynn writes that after Elon Musk, the scales have fallen from his eyes about social media.

And finally, Euston station is to display new £1.5m, high-definition passenger information boards which we’re told are better than the current lot. Now all we need is some trains.

Have a lovely weekend.

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