finance

Tory manifesto pledges only modest increases in spending


The Conservatives on Sunday sought to use their election manifesto to position themselves as the prudent party to end austerity as well as deliver Brexit.

“Get Brexit done — and we can focus our hearts and minds on the priorities of the British people,” said prime minister Boris Johnson as he outlined plans to revive public services hit by almost a decade of austerity-inspired cuts.

There were some new public spending pledges in the Tory manifesto, and this meant the Conservatives joined Labour and the Liberal Democrats as a borrow, tax and spend party over the next five years. Below are five key findings.

1. The scale of the Tory tax and spending plans is very limited

Forget Mr Johnson’s big promises in his Conservative leadership campaign, such as raising the threshold at which people pay the top rate of income tax to annual earnings of £80,000, which would cost £9bn each year. Such pledges are not in the Tory manifesto.

Instead the manifesto promises are very modest. Aides to chancellor Sajid Javid sold the Tory plans as “prudent” but noted they came on top of large spending increases for the National Health Service last year and education and police in the September spending round.

With little leeway in Mr Javid’s new fiscal rules, Conservative manifesto giveaways had to be financed with additional taxation.

The Tories are proposing £7bn of tax rises by 2023-24, almost entirely consisting of scrapping a planned cut in corporation tax to 17 per cent from April.

This will pay for £3.6bn of different tax cuts and £3bn of additional public spending. Over half of the additional spending in 2023-24 is for the NHS.

At £3bn, the Conservatives’ planned increase in day-to-day spending is therefore nothing like Labour’s proposed £83bn, and the Lib Dems’ £50bn (on an equivalent basis).

Torsten Bell, director of the Resolution Foundation, a think-tank, said: “The gap between the parties on public spending is now huge.”

Bar chart of Day-to-day public spending showing modest Conservative public spending plans

2. The Conservatives are optimistic about the economy

Mr Johnson expects the economy to have a smooth ride in Brexit Britain.

The government’s economists said last year they expected that Brexit outcomes along the lines of Mr Johnson’s proposals to be worse for economic growth than staying in the EU, but the Conservatives reject this. Mr Johnson said in the manifesto the Tories would run “an ever stronger and more dynamic economy”.

Robert Chote, chair of the Office for Budget Responsibility, lent some support to the Conservatives in October when he wrote to the Treasury to say that it was “unlikely” that Mr Johnson’s EU withdrawal agreement and planned trade agreement with the bloc would have “made a significant quantitative difference” to the OBR’s forecasts.

But some leading independent economists think the Conservatives’ Brexit plans imply worse economic performance over the next five years.

Professor Jonathan Portes of King’s College London, said: “Given that the government’s own analysis shows that the Tories’ Brexit plans would lead to a significant hit to the economy and to tax revenues over the next five years, it is difficult to understand how it’s possible for the Conservatives not to take account of it.”

3. The Tories have no costing for social care

The Conservative manifesto contains one expensive pledge on future financing of social care, by saying that “nobody needing care should be forced to sell their home to pay for it”.

The party does not cost this pledge. Labour’s proposal of free personal care — help with daily living but not accommodation costs — was costed at £10.8bn a year, indicating that this is a large omission by the Tories.

The Conservatives therefore have a large hole in their manifesto costings, which implies additional tax increases, more borrowing, or public spending cuts elsewhere.

4. Some of the party’s figures rely on aggregation to look impressive

The Conservative manifesto can be seen as an exercise in value for money.

There were multiple commitments to additional public spending, which all cost rather little, although the figures were beefed up by the Tories aggregating the pledges over several years.

Mr Johnson, for example, highlighted “a new £1bn fund for flexible, high quality wraparound childcare — available after school and outside of term time”.

The small print shows this amounts to only £250m a year, which for 4.7m primary school children would provide £1 per child each week. The Liberal Democrats promised £14bn a year in this area.

The Tories costed a “national skills fund” for workers at £700m, while Labour proposed spending nine times this amount.

5. There will probably be more tax increases to come under the Conservatives

The Conservatives’ big tax pledge is to cut national insurance contributions, by raising the threshold at which employees start making payments. They have also promised not to raise the rates of the three largest taxes: income tax, national insurance and value added tax.

The Institute for Fiscal Studies, a think-tank, was strongly critical of this “triple tax lock”. Paul Johnson, director, said: “It is a fundamentally damaging narrative — that we can have the public services we want, with more money for health and pensions and schools — without paying for them. We can’t.”

With Tory pledges to improve public services and social care, it is therefore more likely than not that the Conservatives’ spending plans will be revised higher, funded by lots of small tax increases rather than one big one.

For example, the Conservative manifesto said the party would “review and reform” entrepreneurs’ relief from capital gains tax.

Bar chart of £m 2023-24 showing Conservative tax rises balance cuts and spending increases



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