Boris Johnson and Jeremy Hunt’s economic plans came under fire from senior Conservatives today who condemned “random” spending commitments which made Labour look like “fiscal moderates”.
Nicky Morgan, chairwoman of the Commons Treasury committee, led the criticism after both contenders to be prime minister made fresh spending promises.
Mr Johnson’s campaign floated the prospect of a pay boost to millions of public sector workers, while Mr Hunt offered £6 billion to ease the economic blow and tariffs, including for farmers and fishermen, of Britain hurtling out of the EU with no deal.
However, after years of austerity to bring Britain’s public finances under control, Ms Morgan told the Standard: “It seems it’s too easy for Boris Johnson and Jeremy Hunt to forget just how tough it has been to get the public finances back into balance and the really difficult decisions that had to be made.”
Former Tory party chairman Lord Patten was more withering in his criticism of the Tory leadership battle.
“The debate is awful, with the latest campaign on both sides… with all the tax pledges and spending pledges…making the Labour Party look like fiscal moderates,” he told BBC Breakfast. Paul Johnson, director of the Institute for Fiscal Studies, was also surprised by the spending sprees, saying: “It’s worse than a general election. Both candidates are falling over themselves to offer big tax cuts and spending increases, yet they provide no idea where the money will come from.”
The IFS has done an analysis of both contenders’ spending proposals. For Mr Johnson’s plans, it says:
Increasing the 40p higher income tax threshold to £80,000 would cost £9 billion and benefit four million income taxpayers. The biggest gainers would be high income pensioners as they would not be affected by the accompanying increase in the National Insurance ceiling.
- Mr Johnson’s campaign has proposed increasing the point at which people start paying National Insurance contributions (NICs) to help people with low incomes, but has not set a target. Increasing the NICs floor costs at least £3 billion a year for each £1,000 it is raised, says the IFS.
- Mr Johnson has also earmarked £4.6 billion for extra spending on education, £45 million to support more free cash machine, and £4 million for Army income tax protection.
His team stressed all these commitments could be funded by the £26 billion “fiscal headroom” which the Treasury has identified, provided there is not a no-deal Brexit. A campaign source added: “Boris has made it clear that he wants a low-tax, high-wage economy. In London, the biggest boost was for the lowest paid with the rollout of the Living Wage later adopted by central government. His tax proposals will benefit the lowest paid workers and those on middle incomes — further proposals will come in due course.”
On Mr Hunt’s plans, the IFS says:
- Cutting the main rate of corporation to 12.5 per cent would cost around £13 billion per year in the short run, though probably somewhat less in the long run. Mr Hunt’s team believes the bill would be £9 billion.
- He has set an aim, rather than a firm commitment, for people to be able to earn £1,000 a month without paying NICs. Raising this threshold to the same level as income tax, £12,500, would cost at least £11 billion a year.
- Increasing defence spending to 2.5 per cent of national income would leave a £12 billion bill by 2023/24 compared to the current two per cent plans.
- Cutting the rate of interest on student loans to the RPI rate of inflation would cost just over £1 billion over time.