A £50 BILLION “black hole” in the public finances which has sparked calls for government spending cuts would disappear entirely if the debts were calculated differently, a group of economists said today.
 
Economists with The Progressive Economy Forum said their findings mean possible government austerity-driven spending cuts or tax rises to address the alleged “black hole” could be more damaging to the economy than the so-called debt.
 
The government has previously used a different measure for calculating public debt and returning to this would leave the public finances with £14 billion to spare. 
 
Public debate about the government’s tax and spending options ahead of the Autumn Statement has seen a so-called “black hole” in the public finances highlighted. 

It has been labelled as being between £35 billion and £60 billion, leading to calls for government austerity cuts or tax rises.
 
But The Progressive Economy Forum said the “fiscal hole” is just the difference between an uncertain forecast of how much the government will spend and borrow in the future under current plans, and what it could afford to do if it gets debt falling as a proportion of the economy in three to five years.
 
The “black hole” can shrink or grow dramatically if the economy grows faster or the timeframe changes and this has far more of an impact on the debt than possible spending cuts or tax rises. 
 
Economists Dr Jo Michell and Rob Calvert Jump authored the research using forecasts from the Office for Budget Responsibility. 

They found small changes in forecasts and accountancy rules have a far bigger impact on the so-called £50 billion debt than changes in taxes or spending cuts which the government is reportedly considering for the Autumn Statement.
 
Prime Minister Rishi Sunak while he was chancellor used a different accountancy rule in 2021 and 2022 to calculate his chosen statistic for government debt.
 
Mr Calvert Jump said, “There is now a consensus among economists that austerity does significant damage to an economy’s potential, undermining growth, as the experience of the last decade in Britain has shown us.
 
“Further austerity will do far more damage than a ‘fiscal hole’ that disappears with tweaks to models or accounting rules.”
 
Dr Michell added: “These results show that the government is basing its economic policy on very shaky foundations.”