Tory claims of a ‘fiscal black hole’ in government finances is designed to intimidate workers into taking pay cuts, argues John Westmoreland

There is nothing the Tories like better than a national crisis. They imagine that they are the national saviours prepared to make endless ‘tough decisions’ that require special Tory resolve. Their mythology deliberately rekindles Tory myths about Churchill and Thatcher to keep alive the idea that threats to our country have to be met by distinctly Tory leadership.

This is why, as Larry Eliot argued in the Guardian recently that: ‘Economic policy in the UK is peppered with the language of S&M. The Treasury demands budgetary discipline.’

And who better to impose discipline than the Tory graduates of Eton and Oxford?

Jeremy Hunt’s Autumn Budget Statement is going to demand another round of austerity, including taxing us more while cutting public spending. At a time when the economy is going into recession and employment figures are expected to reach at least a million, his measures will heap misery on working-class households and potentially wreck what’s left of welfare infrastructure. The NHS currently has seven-million people waiting for treatment, and despite the energy-price cap, household fuel bills are double what they were a year ago.

Designed to intimidate

Hunt intends to argue for austerity because there is alleged to be a ‘fiscal black hole’ in government finances. But recent research from economists at the Progressive Economy Forum shows this to be a carefully constructed myth used to make the madness of austerity look like a realistic alternative.

Hunt is going to argue that the money spent on the pandemic has left government finances facing a chasm between where we are now and where we should be. And tax rises and spending cuts will help to rebalance government finance. The rhetoric will stress the need to ‘protect the most vulnerable’, while forcing the necessary medicine of austerity down our throats.

This is nonsense. Firstly, the government covered the costs of the pandemic largely through increased borrowing, which did not trouble the markets. The fallout from Truss’s budget was about other issues than government debt in itself. Secondly, austerity will not make the recession ‘as shallow as possible, and as brief as possible’ as Hunt claims. Reducing household budgets will deepen the recession, further undermine the necessary social infrastructure that the economy relies on, and therefore reduce taxation revenue. Austerity will make the deficit larger, not smaller. Lastly, the ‘fiscal black hole’ is itself shown to be a fabrication.

The report from the PEF shows that ‘the widely reported £50bn “hole” in the public finances is the result of government accountancy rules and highly uncertain forecasts, not tax or spending decisions.’ The authors also argue that small changes in the forecasts of future interest rates and growth wipe out the hole in government finances. Additionally, the Treasury has included the Bank of England’s debt in the government’s own figures; without this con the ‘fiscal black hole’ disappears.

Sunak and Hunt want to use government powers to tax and spend to intimidate the working class into submission on the wages front. Already Sunak is saying that the wage rise demanded by nurses is unaffordable. If the trade unions and Labour give in to the Tories on this economic nonsense, they will allow technocrats in the City to impose a bankers’ budget that will condemn more working-class families to misery for years to come.