The black hole myth & the brain drain conundrum

Coffee House Shots

The Spectator

News, Politics, Government, Daily News

4.4 • 2.1K Ratings

🗓️ 28 November 2025

⏱️ 16 minutes

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Summary

With Budget week finally at an end, certain mysteries remain. Chief among them is why the Chancellor decided to give an emergency speech preparing the public for a rise in income tax.

On 4 November, Rachel Reeves summoned journalists to Downing Street early in the morning to warn that ‘the productivity performance we inherited is weaker than previously thought’. She then refused to rule out hiking income tax rates – sending a clear signal to markets that rises were coming. Nine days later, however, the Treasury let it be known via the FT that income tax increases would not be needed after all. When the gilt market reacted badly – assuming Reeves had abandoned fiscal tightening – Bloomberg was quickly briefed that the U-turn was due to a more favourable picture from the Office for Budget Responsibility (OBR) watchdog.

Now that the dust has settled, however, the facts don’t support any of this. For starters, despite Reeves’s comments about the weak ‘productivity performance’, there was no productivity-related black hole to plug. It wasn’t that the downgrade to productivity growth was milder than expected – in fact it was severe, amounting to £16 billion. But this was more than offset by a £31 billion increase in expected tax receipts, driven by persistent inflation pushing up wages and making the economy more ‘tax rich’. The result: no black hole at all. Before her Budget measures were included – the benefits U-turns and spending increases – Reeves was actually sitting on a £4 billion surplus against her fiscal rules. She didn’t technically need to do anything.

To discuss the black hole mystery, Megan McElroy is joined by Tim Shipman and Michael Simmons. They also cover new data on the UK's brain drain, and assess whether the figures should be a cause for concern.

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Transcript

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0:00.0	Subscribe to The Spectator in our Black Friday Flash Sale and you'll get 12 weeks of the magazine, along with full access to all of our online content, for just £12. Not only that, but we'll also send you a bottle of Johnny Walker Black Label Whiskey worth £30 on the shops, absolutely free.
0:18.3	Hurry though, this ridiculously good offer, ends on the 1st of December.
0:22.6	Go to www.spictator.com.ukuk forward slash Friday.
0:35.3	Hello and welcome to Coffee House Shots, the Spectator's Daily Politics Podcast.
0:39.4	I'm Megan McElroyd and I'm joined today by Tim Shipman and Michael Simmons.
0:43.6	Michael, we've had another gem from the ABR this morning.
0:46.4	Can you tell us a bit more about it?
0:47.7	Oh, it's absolutely brilliant this.
0:49.2	It's funny, I woke up this morning thinking, oh, have I been too harsh on the Chancellor in my coverage? Maybe I should
0:57.6	have given her a bit more leeway. But with the sort of bombshell that the OBR have confirmed
1:03.2	this morning, and I think maybe I wasn't harsh enough, if listeners take their mind back to all the
1:10.2	coverage that was being fed to journalists from
1:13.1	Treasury briefings in the run up to the budget, it was all about how we were going to have
1:17.5	this massive productivity downgrade and that was going to produce this black hole worth
1:23.8	20 or 30 billion pounds. And the suggestion from Reeves and her team was that the rates
1:29.5	on income tax were going to have to be increased on all of us to pay for that black hole. So
1:35.9	worried, in fact, was the Chancellor about getting that message out that, now, this bit's important,
1:41.5	the dates of this. On the 4th of November, she summoned the lobby in to see her at 8 in the morning to give this press conference about how dire the public finances had become and that you know this again the suggestion was that the manifesto would have to be broken and income tax rates would go up. But what the OBR have done this morning,
2:03.1	after a bit of pressure to get this out, is released the dates of all the forecasts that they
2:08.8	gave the Treasury and, crucially, what the headroom was on those dates. And one it confirms is
2:15.1	that by the 31st of October, so four days before that press conference,
2:20.3	they had told her there was no black hole.
	...

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