General election 2019: Tory and Labour spending plans ‘not credible’ – IFS

Jo Swinson, Boris Johnson and Jeremy CorbynImage copyright Getty Images

Neither the Conservatives nor Labour are offering “credible” spending plans ahead of the election, an influential research group has said.

The Institute for Fiscal Studies (IFS) said it was “highly likely” the Tories would end up spending more than their manifesto pledges.

Labour, it warned, would be unable to deliver its spending increases as it has promised.

Neither was being “honest” with voters, director Paul Johnson said.

The Liberal Democrats’ manifesto, he said, would involve lower levels of borrowing than under Labour or the Tories, but would still be seen as “radical” in “most periods”.

However, he added that, given the uncertainty around Brexit, it was difficult to determine what the exact effects of the three parties’ blueprints would be.

Labour, the Conservatives and the Lib Dems have all published their manifestos, including spending and taxation plans, ahead of the 12 December general election.

Labour is promising to renationalise rail, mail, water and energy, as well as give a 5% increase to public sector workers in their first year in government if elected.

The Lib Dems say stopping Brexit would deliver an extra £10bn a year for public services – they also want to increase all income tax rates by 1% to fund more NHS spending.

The Conservatives have pledged to postpone a scheduled corporation tax cut – from 19% to 17% – to increase spending on public services.

Speaking in London, Paul Johnson said the Conservatives were continuing to “pretend that tax rises will never be needed to secure decent public services”.

Labour, he added, “pretends that huge increases in spending can be financed by just big companies and the rich”.

Mr Johnson also said it was “highly likely” Labour would need to raise taxes beyond what it is promising to pay for its proposed £80bn a year in extra spending.

“In reality, a change in the scale and the scope of the state that they propose would require more broad-based tax increases at some point.”

He criticised a Tory pledge not to raise income tax, national insurance or VAT over the next five years as “ill advised”, adding the government would “regret” it.

He also added that the party had “failed to come up with any kind of plan or any kind of money” for social care services.

It’s a plague on all your houses – but for very different reasons.

The main criticism of Labour is that its spending on investment is just so big, it wouldn’t be able to deliver it.

The group also says it is highly likely the party’s tax rises would impact, directly or indirectly, on more than just the top 5% of earners.

There’s no respite for the Conservatives though – particularly on their pledge not to extend the transition period included in the PM’s Brexit deal beyond 2020, even if a trade deal has not been agreed.

The idea that the UK might have to trade on World Trade Organisation terms is seen by these economists as something which would be highly damaging to the economy.

It says this could cause an increase in the deficit of the same order, potentially even higher, than would be caused by Labour’s tax and spending plans.

Stuart Adam, senior research economist at the IFS, warned that Labour’s promise that it would only raise taxes on the richest 5% of taxpayers was “clearly not true”.

He said the party’s proposals to scrap a tax break for married couples and change taxes on company dividends would also affect people outside this bracket.

He added that its planned rise in corporation tax would be “passed on” to workers in the form of lower wages, and to consumers in the form of higher prices.

How have the parties responded?

Responding to the IFS assessment, Labour leader Jeremy Corbyn said: “I think our manifesto is bold, it’s ambitious, it’s prepared for”, and had been fully costed.

He said he was “very confident the document would improve the “lifestyle and life chances” of the very poorest people in the UK.

But Chancellor Sajid Javid said the IFS analysis showed Labour’s plans would lead to millions more paying higher taxes.

“Corbyn can’t pretend that it’s only the rich or businesses that will pay the price for his plans. It is the many, not just the few who will be hit with higher taxes,” he added.

Lib Dem deputy leader Sir Ed Davey said the report “shows that neither the Tories or Labour have a credible plan for the economy”.

“Both are failing to come clean with the electorate and ignoring the Brexit black hole their plans would leave in the public finances,” he added.

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