This election campaign represents a missed opportunity to set out a credible vision for the economyby Paul Wallace / November 28, 2019 / Leave a comment
Tax and spend usually comes to the fore in elections and this winter poll is proving to be no exception. The tension between politicians’ eagerness to promise higher spending and their reluctance to divulge the tax bill is all the greater this time because it follows a decade of austerity. How far that should now be reversed is a central political question, determining in turn how much taxes must rise. It comes at a time when the fiscal costs from population aging are mounting while big investments are needed to mitigate and to adapt to global warming. And hanging over everything is the potential fiscal damage from Brexit, especially if it is a hard break with the EU.
How do the budgetary promises and pledges of the Conservatives, Labour and the Liberal Democrats measure up to the challenge ahead? Judging by today’s analysis of the manifestos and costings from the Institute for Fiscal Studies, neither of the two main parties passes the credibility test, though they fail in different ways.
Start with Labour. No one could accuse their manifesto of a lack of ambition, with its decision to ramp up both public investment—by £55bn a year—and day-to-day spending—by over £80bn a year, in each case above existing government plans for 2023-24. Theirs is the biggest commitment to prepare for climate change through their green industrial strategy. And they want to do the most to reverse austerity.
The trouble with the manifesto is not the objective of a bigger state in itself. As the IFS points out, even after Labour’s planned surge in spending, Britain would still be below Germany and several other European countries in the scale of public spending as a share of GDP. Rather it is the unwillingness to accept that a bigger state must involve higher taxes on all taxpayers. Labour’s claim to spare taxpayers other than the top 5 per cent does not acknowledge the fact that higher corporate taxes will be passed through to wage-earners in lower pay or to consumers in higher prices or to shareholders, who include people with pension plans.
Another weakness in Labour’s offer is that it fails to meet the challenge of population aging. The commitment to freeze the state pension age at 66 rather than to let…