Now that it has been spelled out by the OBR that the black hole did not in fact exist media reports which swallowed the Treasury’s spin entirely look ludicrous. It was clearly a rearguard action on the back of the FT’s report at the time anyway…
The Treasury’s full-blown deception operation played out in the headlines:
The BBC wrote as its headline: “Reeves backs away from income tax rates rise after improved economic forecasts.” Hook line and sinker…
It went on: “A proposal to increase income tax rates by 2p, while cutting National Insurance by the same amount, was sent to the OBR as an option earlier this month to be costed, to help fill what was then a £30bn gap in the public finances, mainly caused by a downgrade to productivity. Newer assessments from the OBR appear to have increased the projected strength of wages and tax receipts in the coming years and offset several billion pounds of that gap, taking it closer to £20bn.”
Robert Peston mused on his main ITV report:
“I am told that earlier this week, the Treasury received improved data on current and expected future wage growth, and that this has therefore increased forecasts of future tax revenues.
This, of course, means that the projected margin by which the chancellor will fail to meet her fiscal targets – the hole in the budget – has fallen, and presumably to less than the previously projected £30 billion hole.
Which means the pressure on Reeves to raise income tax rates – and therefore breach the party’s election manifesto – is not what it was even last weekend (1p on the basic rate raises circa £8 billion, and a penny on all the rates raises circa £10 billion in toto).”
As it turns out OBR forecasts had strong wage growth eliminating the productivity black hole as far back as September, and fully delivered by late October. The £20-30 billion black hole did not exist. The media, which spends a lot of the time pointing out to Reeves that she can’t be trusted, went ahead and reported without scrutiny the Treasury’s Budget forecast deceptions…
Former Treasury minister and adviser to Burnham in the Makerfield campaign Lord Jim O’Neill, who has turned down a role in his government, said Burnham’s first statement Commons was:
“The last thing investors wanted to hear… gilt yields have risen by a 0.25% in one day, which is a lot. We’ve not had that since Liz Truss days… If your country is under the focus of ‘can they come up with a sensible fiscal strategy’ on a day when the markets think ‘well no, you’re not showing any sign of it’ you’re going to have a tough day…if it stays like this your mortgage rate is going up.”