Is there a £22 billion ‘black hole’ in the public finances?

In a speech in the Downing Street garden today, the Prime Minister Sir Keir Starmer said there’s a “£22 billion black hole in the public finances”. 

We’d already heard Labour party chair Ellie Reeves mention the same figure during interviews this morning.

Mr Starmer and Ms Reeves are referring to an announcement made by the chancellor, Rachel Reeves, last month. At the time, she said an audit by the Treasury had discovered a £22 billion forecast overspend this year. 

We looked into this last month. 

Ahead of the election, the Institute for Fiscal Studies (IFS) had said that a new government would likely see a shortfall of £10-£20 billion by 2028/29. After the chancellor’s statement, IFS Director Paul Johnson said many of the challenges Labour outlined in July were “entirely predictable”, but that the in-year financial pressures did “genuinely appear to be greater than could be discerned from the outside”. 

Following the chancellor’s statement, the Office for Budget Responsibility said it had launched a review into the preparation of the Departmental Expenditure Limits forecast for the March 2024 Economic and Fiscal Outlook, the report they produced for the then Conservative government’s Spring Budget. The review would look at the “adequacy of the information” provided by the Treasury at the time.