On the Subject of....Black Holes

 

We've been hearing rather a lot about ‘Black Holes’ over the last 3 months or so….some would argue a bit too much.

Sadly, there has been little attempt being made to explain their true origin or properties, and the focus instead has been on explaining how terrible things are likely to get for us all because of them.

In an attempt to dispel some of the current UK.Gov-induced pre- (and now post- !) budget gloom and despondency, I’ll take a light-hearted look at these not-so-celestial phenomena and attempt to explain them for the interested reader.

Firstly, do they resemble the cosmological feature of the same name ? In some ways, they would certainly appear to....

Physical black holes are frequently found at the centres of galaxies, and have such huge masses that their gravitational attraction sucks in everything in their vicinity, including light. They thus have a habit of getting progressively bigger…and darker, and present a distinct ‘event horizon’ beyond which nothing is visible, and the passage of time near them slows down to virtually zero.

Our 'friendly neighbourhood' financial (hitherto referred to by Labour as ‘The Tory’) Black Hole does appear to be behaving in a similar way.

When it started life as an ‘inheritance’ Black Hole in July its financial 'mass'  stood at £22Bn. The ‘Tory’ element of this, after further analysis, was downgraded by financial industry experts to £13Bn when the super-inflationary pay rise promises made post-election were dissected out (needless to say this was refuted by Labour). 

Somewhat alarmingly, it suddenly rose from £22Bn to £40Bn shortly before the budget, ostensibly because of the need to fund ‘improvements’ in public services going forward (at least that's the excuse Reeves is sticking to at present). Given its recent performance, we can reasonably assume that the hole is in a rapid expansion phase, characterised by rapid 'quantum leaps' and will keep sucking in funds in ever-increasing dollops for the foreseeable future. This puts the puny efforts of our industrious band of financial online scammers to extract cash from us all to shame (we should perhaps take some comfort in at least one industry that shows signs of growth !). Current estimates are that, at its present rate, the black hole will top £100Bn by Christmas and could conceivably reach £1Trn by 4Q25 if its growth continues exponentially. All this begs the question “is the current administration really in control of the phenomenon ?”

A reliable source inside the treasury reported hearing part of a phone conversation made by the chancellor recently: “…it’s insatiable, PM, we just don’t seem to be able to stop it…”, ....which would tend to suggest not.

Is there any way its growth can be controlled or even retarded ? The unfortunate truth is probably not...at least not by those who profess to be 'in charge'.

The reason for this is that the treasury is faced with the task of funding a number of smaller, i.e. secondary, black holes, the largest and best known of which is, of course, the NHS. 

This splendid institution has looked after our collective health faithfully through thick and thin over the past 75 years, but has been gobbling up funds in ever-increasing quantities since its foundation in the late 1940s, and will continue to do so at the exchequer's expense until its funding model is changed, and it is properly integrated with adult social care, as it is in our principal north west European neighbours, France and Germany (see this link for more details on how we could achieve this). 

The chancellor has already identified the NHS as a major recipient of the increased public sector funding which she claims will be made possible by the increase in the size of the Black Hole; this gives us a good indication of why its growth rate is increasing. Although she claims vigorously that UK isn't returning to austerity, 'Austerity 2.0' as it's already been dubbed is certainly 'alive and well' for the pensioner population, and looks like taking hold in the near future for working age benefit claimants, with a measly 1.7% increase in benefits due next April. This is to say nothing of the additional cuts and tax rises Reeves will have up her sleeve going forward.

Another example of a ‘secondary’ Black Hole draining funding at an increasing rate is the Welfare budget, which is burgeoning as a result of the increased levels of ill-health in our society and the unemployment this generates. A lot of this increase is a direct result of lack of funding in the NHS, which has created a vicious circle of ill-health due to its inability to cope with the increased demand. To be fair to the Health Ministry, they do genuinely recognise this as an issue, but have not yet come up with a strategy that deals with the true complexity of the problem. Sadly, current efforts by Wes Streeting to generate a strategy for the future are mostly confined to continued applications of  expensive 'sticking plaster', and are doomed to fail unless the funding model problem is properly addressed. Providing obese patients who have major secondary health problems with weight loss drugs and then packing them straight off to the job-centre in their wheelchairs will certainly not help solve either the NHS or the productivity crisis. What it is more likely to do is to put even more strain on the health budget as these folks get even more stressed and become permanently unfit for work, and thus more liable to turn up at A&E.

Last but not least, the Pensions budget is increasing, as a result of the elderly population surviving longer. The loss of winter fuel payments and any other universal benefits we lose in future may slow this growth in demand down a bit by killing off a few tens of thousands more pensioners than usual this winter, but this type of 'minor cull', as Starmer would see it, won't really make much of an impression on the 11 million plus total. Those who fall prey to the WF cut and leave this world prematurely will in any case be replaced by new pensioners within weeks due to the natural ageing process. The increase in Pension Credit claims from desperate pensioners who have lost their heating allowance and can't make ends meet may also negate any financial gains from Winter Fuel, as discussed previously. 

The chancellor is thus in something of a quandary as to how to satisfy the voracious appetite of ‘The Black Hole’ (as we should now call it, since all possibility of claiming it was entirely Tory-induced has now gone out of the window). Her latest salvo appears to have been to propose a significant increase in NI employer contributions. Although some have complained that this will technically break manifesto commitments not to increase taxes on workers, it is likely to go ahead, as she is effectively ‘hemmed-in’ on tax rises by the specific manifesto promises on worker-related taxes, and thus has ‘nowhere else to go’. There is also talk of applying NI to employers contributions to workers' pensions, which would affect workers directly by reducing the growth of their pension pots. 

If adopted, the move will be bound to have a detrimental effect on the job market by making it even more expensive for employers to take on new staff, and thus could sharply increase the unemployment total. This is likely to hit hospitality, and the service sector generally, which has been kept afloat by the ready availability of 'cheap labour',  particularly hard. As we are now primarily a service economy, we depend on our SMEs to prosper in order to stand any real chance of growing the economy as a whole. And this will not be helped if a significant number of them actually go under as a result of increases in staff costs and rights.

If NI and other business-related taxes do rise substantially, potential investors in GB plc may well 'take fright', and the prospects of inward investment will then evaporate as quickly as they seem to have materialised last week, (despite Louise Haigh's best efforts!). Gilt yields are already rising in anticipation, and there is a possibility that the economy and the pound may 'tank' and we will risk regaining our previous title of ‘the sick man of Europe’.

On the immediate local effects of the ‘Black Hole crisis’, it looks as though the government may already be planning for the worst – there are reports of some junior treasury staff having gone missing without trace recently, and remaining staff have been advised not to enter the treasury building basement until further notice. 

Like its cosmic counterparts, the Black Hole may already have developed an ‘event horizon’ - the observation that some of the lighting in treasury buildings has dimmed appreciably during the past week despite frequent bulb replacements would tend to support this. Staff have also reported feeling ‘a bit heavier’ this week, and also appear to be working less efficiently, complaining that 'time seems to be dragging more slowly at work nowadays'. We understand that a new chair of Financial Cosmology has been appointed in at least one of our major universities to address the problem, and the new Professor is in consultation with treasury officials as we speak.

All this does not augur well for the government establishment, which could well now be in danger of  literally 'disappearing up its own fundament' within weeks if the Black Hole expands to cover the whole of the Westminster government estate. I suspect its large majority won’t help it much if the inevitable happens and it suddenly disappears from our collective view as a result…

Look on the bright side, though....if this does happen, we can just have another election…

I’m sure I speak for everyone in wishing the chancellor well in her deliberations, and hope that she will still be available on budget day to deliver her much-anticipated ‘Meisterwerk’.

We would strongly advise, though, that she should stay away from the treasury basement until then….just in case.

Update 17.10.24: While I'm not normally one for 'wallowing' in conspiracy theories, an interesting one caught my eye recently, which might just help explain the origin of the (now not-so) mini-Black Hole. 

Some weeks before the election, when it became obvious that his party was headed for defeat, the previous Chancellor was observed using a high-tech communication device of unknown origin and function for several quite prolonged periods. As the theory goes, he was using this to 'summon' a 'seed-micro' Black Hole from Galactic Central, the organisation who own and manage the massive object located in the constellation of Sagittarius at the centre of our galaxy. 

While it's not clear how they managed to get it here at speeds well in excess of the speed of light, worm-hole routing was probably involved. The 'seed-hole' has obviously germinated well and is now fulfilling its intended function in presenting a major budgetary headache for his opposite number. (Seed black holes of this type normally come with a coded anti-matter retardant to allow their activity to be controlled, and we believe this one is manageable - in the right hands.) 

'Our Jez', as he is affectionately known to the Amalgamation of Galactic Wizards (AGW), holds an honorary fellowship and is a well established Master of Wizardry in his own right. With his expertise and galactic connections, there is no doubt that the theory is a plausible one - if correct, it sheds a whole new light on where contemporary politics might be heading....Trump supporters beware.

Update 31/10/24: The Black Hole seems to have been brought under control - temporarily at least. The OBR (the organisation that normally 'rubber stamps' government budgetary plans - unless of course your name is Liz Truss) has now confirmed that the true size of the inherited 'Tory' black hole was actually £9 billion. Everything else added since has been based on Labour's herculean efforts on pay settlements since July and their future spending plans for 'improving' public services. As yet, we're not quite sure exactly how its growth rate was brought under control - it's possible that 'Grand Wizard Our Jez' has got his magic wand out again and worked his magic (the prominent mug-shot displayed at the head of the Telegraph's article is probably no coincidence). Let's hope he remembers to put the new 'smart-wand' on charge for when he needs it again - with the budget NI hit to our SMEs and the likely decimation of most of our small farms due to IHT inclusion, this might not be too far ahead!

First published 16.10.24