The fiction in Labour’s spending and funding commitments

Labour’s Manifesto includes a ‘costs and funding’ document called ‘Funding Real Change’. We await the IFS’s verdict.

Importantly there will be no debt/GDP ceiling under Labour. There will therefore certainly be more rating agency downgrades if Labour wins meaning higher borrowing costs for everyone.

There are also no Impact Assessments eg for the economic impact of introducing a 4-day week within a decade; for transferring 10% of shares into employee ownership funds; and for ending zero hours contracts.

The following spending assumptions look way too low:

– £10.8 billion per annum for free care for the over 65s

– £1.4 billion for free prescriptions, free dentist appointments and free hospital carparking

There is no costing for the free broadband pledge. Nor for free bus travel for under-25s.

The ‘Net Worth’ criterion for public sector investment projects is far looser than the Green Book safeguard currently in place, meaning many dubious projects will be undertaken.

The following tax assumptions  look way too optimistic:

£5.4 billion from income tax – There is evidence that the tax take even falls when you increase the tax on very high earners

£23.7 billion from Corporation Tax – This is pure fiction. Large companies have many ways of avoiding corporation tax.

£6.3 billion from changing  the tax regime for multinationals – Same applies – they will simply transfer production abroad, leading to job losses in the UK.

£8.8 billion from a financial transactions tax – Pure fiction. It is very easy to switch transactions to another financial centre.

lab manifesto 2019

Addenda

Rowena Crawford, an associate director at IFS, said:

“Keeping the state pension age at 66 would be costly, potentially adding around £24 billion per year to the cost of state pensions by the late 2050s. This would be on top of the dramatic, £38 billion per year, increase in spending on state pensions projected even with the planned increase in the SPA to 69. Increasing the SPA is a coherent response to increases in life expectancy at older ages and would keep the average share of life spent in receipt of a state pension constant.

Sunday Times (24/11) says Labour will pay £58bn in compensation to the ‘Waspi women’. Another pledge that isn’t in the manifesto and isn’t costed.

Another Corbyn bribe ……………….