The IFS’ party manifesto analysis presents the difference between what parties say policies will achieve, and hard reality of what will actually happen over the next five years. On borrowing, taxation and spending, each party’s manifesto strains under scrutiny.
At their manifesto launches, the Tories presented a compassionate front as Labour cast themselves as the new party of fiscal responsibility. However, the IFS shows two main parties are living up to their reputations: the Conservatives are aiming for an unprecedented cumulative cut of 32.8% to non-ring-fenced departmental budgets between 2010 and 2019; and the IFS has deduce that Labour will have to borrow around £26bn per year from 2017-18. It appears true colours show under the microscope.
Drilling down to specifics, the IFS’ analysis of each parties’ headline policies come in for strong analysis at the hands of the think tank’s analysts.
For example, the Tories’ plan to raise the personal tax allowance will mostly benefit higher earners, and the IFS says it is “hard to see the economic or social question to which [allowing parents to pass on property worth £1m tax free] is the right answer.” Also, the party’s pension tax relief reforms also raise questions such as why someone earning £150,000 will able to save £40,000 in a pension, while someone earning £210,000 will be able to save just £10,000.
Labour’s 50p tax rate is also brought to bear. Despite its cornerstone role in the party’s taxation strategy, the IFS predicts it will yield just £110m a year, or enough to fund the NHS for barely ten hours. Concerns are also raised that Labour’s compulsory jobs guarantee could actually put existing workers at risk.
With their spending and borrowing plans falling between these two parties, the Liberal Democrats are right in saying that they strike a balance between them. However, they are undermined by a dependence on revenues from “highly uncertain measures to reduce tax avoidance and evasion by 2017–18.” All the parties are hoping to raise significant sums from such measures, but none is more dependent on this revenue than the Liberal Democrats.
It appears that none of the parties has learnt from the Swiss Tax deal of this parliament, which only managed to raise a quarter of its expected revenue. Talking about cracking down on tax avoidance and evasion sounds great, but this is real money owned by real people, who will take action to keep it.
The IFS describes the parties’ stance on this matter well: “it is not helpful to the public debate to pretend that raising such sums is easy, certain or necessarily painless.” The main parties may find that the stronger they try to grasp this revenue, the quicker it slips through their fingers. This would be less concerning if this revenue wasn’t playing such a crucial role in all of their financial plans; the IFS sounds rather concerned when it informs us that this tax revenue has been “plucked from thin air to make their plans add up”.
The IFS also shines a light on the parties’ benefits spending plans, and notes that the Conservatives are yet to explain where £10bn of social security spending cuts will be found. Given this is almost 10% of the total current welfare budget, it may be difficult to garner voters’ support without telling them where such a large axe will fall.
Welfare spending is a difficult policy area for Labour as well, due to their reputation for big spending in this area. A policy that the party has held up to show their seriousness about limiting benefits is the capping of child benefit uprating at 1% in the current year and next year. However, this is already in place, and as the IFS states, “It is bizarre and indeed misleading to include a policy that has already been implemented by the government as a future manifesto commitment.”
Overall, as it stands, the Conservatives are either not telling voters where they will cut a huge amount of welfare spending (or they don’t know); Labour is being too vague about how much they will borrow, and the Liberal Democrats are already counting money that they don’t even know exists.
As a result, the IFS concludes, “the electorate is at best armed with only an incomplete picture of what they can expect from any of these four parties”. We may wonder if the parties themselves have an incomplete picture of how they will run the country, or are hiding measures and plans which they know voters would find unpalatable. From conversations with members of the parties, there also seems to be an “it will all work out” attitude which many voters could find disconcerting.
At the end of the day, the abstract millions and billions discussed in the manifestos are pounds and pennies that need to be earned by taxpayers. The parties should feel a much greater responsibility to tell us how much they plan to borrow, tax and spend over the next five years, and how much it’s going to cost us, the British people, in every sense of the word.