13 November 2022

Weekly Briefing; The numbers game


When Jeremy Hunt stands up to deliver his Autumn Statement, one figure will be at the forefront of people’s minds – £55bn. That’s the black hole’ in the public finances the Chancellor has been tasked with filling with a mixture of tax rises, ‘fiscal drag’ and spending cuts.

To the layman, this scarily large number probably sounds like a simple plus/minus sum, comparing money going in and out of the Treasury. But it’s really much fuzzier than that and rests on movements in the cost of borrowing, energy prices, projections about the future tax take and fiscal rules that are as arbitrary as they are changeable. Indeed, calling them ‘rules’ feels more like a semantic trick every time a new Chancellor tears up their predecessor’s version.

That is not to understate the financial mess the Government has to deal with, but we should be wary of treating this particular figure as if it’s carved in stone. And interesting though the ‘black hole’ debate is on its own terms, it’s also a good example of the way that strikingly arbitrary numbers can end up shaping political decisions.

The Bank of England works on the basis that inflation should be at 2%, Nato says member states should spend 2% of GDP on defence, the UN that we should spend 0.7% of GNI on international development (a figure that was arrived at in 1972, incidentally). Or look at our state pensions, where the triple-lock dictates that pensioners’ incomes must rise by inflation, wages, or the rather random figure of 2.5%.

There’s also a problem of what a particular target describes. As Ian Acheson explained in a recent CapX piece, New Labour’s attempts to bring down overall recorded crime ended up having nefarious effects on policing, with local bobbies encouraged to feel the collars of easily apprehended local youths, rather than focusing on trickier offenders. The problem was data deprived of nuance, so ‘crime’ was treated as a single phenomenon, not a series of totally different behaviours that need different kinds of attention.

Another curiosity is our very human bias towards round numbers. So we get the BBC reporting gravely today that the number of migrants arriving on small boats has passed 40,000, as if that makes the situation qualitatively worse than, say, 39,600. Or take the aim to hit Net Zero by 2050. Has that year been chosen because of scientific precision, or because it’s easy to remember? Why not decarbonise by 2048, say, or 2052?

We see the same temptation to gloss over uncertainty with a neat-sounding number in the £2,500 energy cap – which might sound at first blush like a firm limit on spending but is really nothing of the sort when you get into the weeds of what it means.

With all of these the problem is not that targets are a bad thing, but that they can do a great deal of damage if they become the only thing people care about. That’s something Mr Hunt should bear in mind when he stands up to wield the axe on Thursday.

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John Ashmore is Editor of CapX.