IFS: Labour & Tory manifestos not entirely “honest”
The IFS verdict on the manifestos of the two main parties is that “neither sets out an honest set of choices”. They also say very little about Brexit.
The Institute for Fiscal Studies (IFS) has published its analysis of the two main parties’ manifestos. They did also include some analysis of the Lib Dem manifesto but concentrated largely on Labour and the Conservatives. Speaking about it, IFS director Carl Emmerson said that whilst there are clear “fiscal differences” between the two manifestos, “neither sets out an honest set of choices”. Emmerson added that neither addressed the long-term challenges faced by the country.
There are already signs of an economic slowdown and there is also our ageing population. As well as not offering “an honest set of choices”, both manifestos also said very little on Brexit and the potential impacts of it. Yet, Brexit has got to be one of the biggest challenges the country is facing.
Labour: big spending and likely higher taxes than already promised
On the Labour manifesto, Emmerson said it was unlikely that the party could meet its huge spending plans without increasing taxes further than the manifesto commits too. He added that it was misleading that the promised tax rises would only be met by “faceless corporations and ‘the rich’”. And although Labour’s proposed increase in corporation tax would still be the lowest amongst G7 countries, Emmerson warned that it “might compound the risks to investment associated with Brexit”.
This figure on schools spending from the IFS analysis does a good job of demonstrating the difference between the two plans.
Just looking at both parties’ promises on schools funding, the IFS found that the Tory plans would actually translate into to 6.9% real fall in per pupil spending while the Labour plan would mean a 1.6% real increase in per pupil funding.
Tories: more spending cuts and immigration policy that risks damaging the economy
In contrast to Labour’s “significant” spending plans, the Tory manifesto simply offered “the cuts already promised”. And while the party did not rule out increasing taxes, the tories maintain that they are the party of “low taxes”. Emmerson said that the big risk presented by the Tories is that “after seven years of austerity, they would not be able to deliver the promised spending cuts either at all or at least without serious damage to the quality of public services”. With our public services already at crisis point, it seems a pretty damning statement.
Their continued focus on reducing immigration would, if effective, cause considerable economic damage as well as creating an additional problem for the public finances
Carl Emmerson, director of the Institute for Fiscal Studies
Emmerson noted that the Tory plans did at least try to confront the challenge of Britain’s ageing population but changes to pensions and winter fuel allowances “would make a wholly trivial difference to spending” in practice. He also warned the commitment to reducing immigration would “cause considerable economic damage as well as creating an additional problem for the public finances”. For Britain’s ageing population, spending pressures on health, pensions and social care would only be more challenging.
Brexit: the elephant in the room
The IFS report says little about what the manifestos mean for Brexit but that’s probably because Labour and the Tories seemed to do their best to ignore it. Even if you take Brexit out of the picture, the IFS concluded that policies by both parties risked economic damage. Labour risks the economy by increasing corporation tax and the Tories risk the economy from reducing immigration. But Brexit is undoubtedly the biggest economic risk to the country. At the very least, each party should be upfront with the public about those risks. Instead, both offer elements of wishful thinking in their goals for a Brexit deal. Both do, however, differ in their position on a “no deal” scenario. Labour reject it while the Tories continue to believe it’s better than a “bad deal”.
In a report on Brexit last year, the IFS said Brexit would impact on public finances. Whilst our net contribution to the EU (Full Fact has this at £8.6bn in 2016) would fall, many economic analyses suggest that the national income would be hit. The IFS said “in the short run, our estimates therefore suggest that the overall effect of Brexit would be to damage the public finances”.
In the short run, our estimates therefore suggest that the overall effect of Brexit would be to damage the public finances.
Using modelling by the National Institute for Economic and Social Research, the IFS said the effect could be between £20bn and £40bn in 2019-20. This is much more than what we currently pay into the EU budget.
In analysis on the manifestos by the Institute for Government (IFG), Bronwen Maddox said “both parties, for all the rhetoric, make too light of Brexit: in cost, in impact on the economy, in immediate effect on people’s lives – and in soaking up capacity in Whitehall and in Parliament”.
The IFG has a handy table breaking down what the Labour and Conservative parties say on Brexit in their manifestos, which you can find at instituteforgovernment.org.uk.