Rachel Reeves repeats ‘£22 billion black hole’ claim in speech to Labour conference

At the Labour party conference this week we’ve heard a number of senior politicians repeat a familiar claim about the state of the economy inherited from the previous government.

In fact, in her speech this afternoon Chancellor of the Exchequer Rachel Reeves twice mentioned a “£22 billion black hole” in the public finances and also referenced “£22 billion of spending plans, this year, that the previous government did not disclose”, while Deputy Prime Minister Angela Rayner mentioned the same figure in her own speech on Sunday.

We looked into this figure when it was first used by Ms Reeves back in July.

It’s taken from a Public Spending Review published by the Treasury which found that “forecast overspend on departmental spending is expected to be £21.9 billion” above the totals set out in the previous government’s Spring Budget.

The figure includes several “unfunded policy decisions” made by the previous government as well as £11-12 billion in higher-than-expected public sector spending on pay, even before newly announced pay rises are taken into account.

The extent to which the economic landscape inherited by Labour was unexpected is disputed, however.

The Institute for Fiscal Studies (IFS) had warned ahead of the election that a new government would likely see a shortfall of £10-£20 billion by 2028/29 which would likely result in cuts to unprotected government budgets. And following Ms Reeves’ announcement in July IFS director Paul Johnson said many of the challenges outlined were “entirely predictable”.

However, he also said that “the extent of the in-year funding pressures does genuinely appear to be greater than could be discerned from the outside”.

Earlier this month, it was reported that cabinet secretary Sir Simon Case wrote in a letter to shadow chancellor Jeremy Hunt MP that the lack of a Spending Review since 2021 has contributed to uncertainty over public finances.

However Mr Hunt said the letter raised “more serious questions” for the government, and suggested that the £22 billion figure may be “a political device to justify tax rises”.

In her speech to conference this afternoon, Ms Reeves also said that she took the decision to means test the Winter Fuel Payment “faced with that £22 billion black hole” and the fact that “the state pension will rise by an estimated £1,700 over the course of this Parliament”.

As we explained earlier this month, the £1,700 figure is correct for the full new state pension based on the expected increase of 4% next year, and Office for Budget Responsibility forecasts for the triple lock from 2026/27 to 2029/30. It would represent an average annual increase of just under £350.