Labour's Black Hole
I’m not sure what the logic is behind Labour’s headline £22bn “fiscal black hole”.
While in opposition the Labour Party didn’t make much noise about government over-spending. COVID-response resulted in £billions being spaffed on bizarre get-rich-quick schemes for Cabinet member buddies or members of the House of Lords and Ladies. Nightingale hospitals were built - costing hundreds of £millions - and were then promptly closed again without housing any patients. The track and trace system was shambolic and hugely expensive (orders of magnitude more expensive than £22bn). PPE acquisition was a farce. Matt Hancock was idiotic - with his devolved administration healthcare poodles equally hapless. But the cost to the public purse of these clown-world policies was without precedent in peacetime. Hundreds of £billions were wasted and many economists argue that the evisceration of the UK economy by the government and its lockdown social experiment may be terminal.
However, during all of this mayhem, the Labour opposition was as compliant as a queue at a vaccination centre. So the obvious question arises, why this £22bn headline number?
It’s not just me asking either. The Financial Times even submitted a freedom of information request:
A freedom of information request by the Financial Times asking for an exact breakdown of the figures was declined. The response from the Treasury’s information rights unit said details would be published respecting agreed timelines “to allow the relevant officials time to complete the preparation of the information to ensure it is accurate and correct prior to publication”.
I’ve also asked, several different ways, on Twitter/X, for some explanation. I’ve replied to Labour Party tweets about the ‘black hole’. I’ve asked Rachel Reeves for clarification. But the tweets are unanswered, as per usual with all-talk/no-answer “government”.
At one level the choice of £22bn is odd. It doesn’t equate to the fiscal deficit (that’s much higher). It doesn’t equate to debt repayment. It’s not the cost of the triple-lock. It’s nowhere close to total UK public debt - that’s definitely in fiscal black hole territory of around £2.7trillion.
So I’m going to be exploring the headline and Labour’s new embrace of fiscal prudence with Mark Astley - one of the most brilliant money market commentators and currency fund managers.
Until a year or so ago, Mark was CEO of Millennium Global, the multi-award-winning asset management firm - managing £billions of currency assets. Mark has launched and managed currency hedge funds, mutual funds and fixed income funds. His global macro and geo-strategic perspectives are underpinned by professional experience spanning London, New York, and Hong Kong.
We’re going to be exploring what’s going on in macro-economic markets and the BRICs. We’re going to focus on the origins of the explosion of UK and US government debt and the move towards CBDCs. We’re also going to discuss whether the UK government may have long lost the ability to manage an economy so dependent on government spending and debt.
Be sure to subscribe to get notified when the interview is live in early October.
If you’re a paid subscriber, please comment on this post to submit questions to Mark in advance of the interview.