Fact check: Is Jeremy Hunt right that the Labour Government could have a budget surplus of £39 billion?

Jeremy Hunt has claimed the Government could have a budget surplus of £39 billion rather than the “fictitious” £22 billion blackhole it says it inherited from the Tories.

Speaking at his party conference in Birmingham, the shadow chancellor dismissed criticism of the Tories handling of the economy, and instead accused Labour of making figures up.

He said: “You don’t have to take my word for it, I mean, just read this week’s Economist where there’s an article saying that [Rachel Reeves] could have actually not a black hole of £22 billion, but a surplus of £39 billion to play with in the budget.

“The Financial Times did a Freedom of Information request to the Treasury to ask where this fictitious £22 billion number came [from], the reply they got back from the Treasury was we can’t give you the workings because we’re not sure they’re accurate.

“Even the Labour Party don’t believe it, otherwise they wouldn’t be having this debate over the winter fuel allowance.”

That’s his claim, but is it true?

Where does the £22 billion black hole come from?

The UK Treasury has refused to provide key details of the £22bn, but that doesn’t mean it doesn’t exist. Chancellor Rachel Reeves says some of it was overspends on the asylum system and the transport budget, as well as the impact of inflation on departmental budgets generally. A £6.4bn cost of supporting asylum seekers being unfunded was the most specific claim, as it did not appear in the Home Office’s departmental budget.

According to the Public Spending Audit, public spending on pay was expected to be around £12bn higher across central government departments in 2024-25, even before the newly announced pay rises were taken into account.

In short, this figure does stand up broadly to scrutiny, and was recognised by the respected and independent body the Institute for Government, and the only real dispute is how much Labour knew about it before taking office.

Speaking shortly after the election, the IFS director, Paul Johnson said: “The numbers may be a little bit worse than they thought at the time, and I think there were some things that were hidden from view, but the overall picture over the next four or five years is very, very similar to what we knew before the election.”

Chancellor of the Exchequer Rachel Reeves faced questions over her figures

Where do Jeremy Hunt’s figures come from?

The shadow chancellor appears to be basing his claim on an article from The Economist, which does not claim there is a budget surplus, but more Labour has not acted in a way to create one.

It claims the Conservatives left Britain with £8.9bn in “fiscal headroom”, the amount of borrowing permitted before the government violates its fiscal rules. The piece continues to suggest that as gilt yields have fallen and growth is ongoing, Britain’s fiscal headroom should be improved then the Office for Budget Responsibility updates its forecasts. It cites figures from Capital Economics, a consultancy, suggesting it will hit £22bn.

The article then suggests excluding the Bank of England’s losses from quantitative easing from the definition of public debt used for the fiscal rules, arguing it could push headroom up by another £17bn.

Is Jeremy Hunt correct?

In short, the piece referenced speculates on ways to create a surplus, but does not argue that there is one. There is no surplus, and it is inarguable the previous Government left a difficult funding situation for the new regime.

However, Labour has also themselves in by basing its decisions on needing to meet the fiscal rules that it imposed on itself. It could have not done this.

Responding to Mr Hunt’s claims, Ellie Reeves, Chair of the Labour Party, said: “Jeremy Hunt's conference sit-down shows that the Conservatives have learnt nothing and are incapable of change.

“It was him and his Tory party that crashed the economy and then left a £22 billion-pound black hole in the nation’s finances.

“Instead of an apology, Jeremy Hunt has criticised every tough decision the Labour government is making to fix their mess. It is like watching an arsonist chastise the fire brigade for putting the fire out.”