The election manifestos of the two main parties are remarkably low on fiscal detail, writes FIONA WALSH
THE ECONOMIC equivalent of a cloud of volcanic ash continues to shroud the tax, spending and debt reduction plans of Britain’s three main political parties despite the publication this week of their full election manifestos.
Last night’s historic but heavily stage-managed televised debate between the party leaders was long on electioneering rhetoric but predictably failed to produce much in the way of additional detail. We still have scant little idea of how their deficit reduction plans will be funded, nor do we really know where the spending axes will fall. At this stage in the election battle the unvarnished truth would undoubtedly alarm the electorate and it seems voters will have to wait until after May 6th to discover precisely how much pain lies ahead.
So what do we know about the economic and fiscal strategies of Labour, the Conservatives and the Liberal Democrats? Prime Minister Gordon Brown chose a hospital in Birmingham in the midlands to launch the Labour manifesto on Monday, promising, “A future fair for all.” Specific pledges included no immediate cuts in spending or increases in income tax for fear of derailing the fragile economic recovery, although spending will be “tighter” from 2011-12 once the danger of a double-dip recession has been averted. Similar “no change” promises on VAT and national insurance were conspicuous by their absence, however.
Labour reiterated its pledge to halve the £167 billion (€190.6 billion) deficit over the next four years, and outlined a series of “tough choices” including efficiency savings of £15 billion this year and £20 billion a year by 2013; a cap on public sector pay and pensions; £5 billion of cuts in “lower priority” spending; welfare savings of £1.5 billion; a new 50p tax rate and bonus tax; reduced tax relief on pensions for the better off and £20 billion of asset sales by 2020. There was also a commitment to raise the national minimum wage in line with earnings.
The City’s takeover laws will be reformed and the banking system more tightly regulated. The Financial Services Authority, the City watchdog, will be given additional powers if needed to clamp down on boardroom excesses.
Those who have been paying attention in recent months will realise that we knew almost all of this already, however, and it was a similar story with the Tories.
The imposing setting of Battersea power station on London’s Embankment provided the backdrop for the launch of the Conservative manifesto on Tuesday, with party leader David Cameron promising to “return power to the people”. The 130-page document outlined the policy divide between the two main parties – taxes (national insurance and corporation tax) will be cut and the budget deficit will be tackled swiftly via an emergency budget to be held within 50 days of the election.
Labour’s planned increase in national insurance will be reversed by the Tories, a move which is widely supported by business leaders who fear the increase will cost thousands of jobs.
City reforms will be tougher than those planned by Labour – the Financial Services Authority is to be abolished while the Bank of England will be given sweeping new powers to regulate the City of London and its markets. A new body would be created to look after the rights of consumers. On bank bonuses, the Tories pledged to go it alone in imposing a levy on the banks if international action cannot be agreed upon.
The Tory target for cutting waste is £6 billion, which will be used to fund the national insurance reduction, with a further £12 billion of efficiency savings earmarked for reducing the deficit.
As with Labour, the manifesto provided little new detail on deficit reduction. Thus it was the Liberal Democrats – the party that has no chance of taking power but which would play a pivotal role in a hung parliament – which came up with the most detailed economic plans.
Leader Nick Clegg chose the somewhat surprising venue of Bloomberg’s headquarters in the City of London for his manifesto launch on Wednesday. Accusing Labour and the Conservatives of “airbrushing” the economy out of the election, Clegg presented radical plans for reform of the tax system and the break-up of the banks into separate High Street and investment banking arms. The plans were laid out in detail, with Clegg boasting that his party alone had tackled the thorny issue of the deficit and the costing of tax and spending proposals.
He promised a major clampdown on tax avoidance, raising almost £5 billion, and outlined £15 billion of spending cuts and a cap on public sector pay. Some £17 billion will be raised by higher taxes, from a “mansion tax” on properties worth more than £2 million to increases in capital gains tax, a tax on the banks, and reduced tax breaks on pensions for higher earners.
That £17 billion or thereabouts will be spent raising the personal income tax allowance to £10,000 as part of the LibDems planned overhaul of the tax system, ensuring some 3.6 million low-earners are taken out of the tax system.
Hats off to the LibDems for showing far more of their workings out than Labour or the Conservatives, although their arithmetic came under immediate and critical scrutiny. The mooted near-£5 billion tax avoidance haul provoked particular scepticism among the City’s number-crunchers, but then the costings provided by Labour and the Conservatives, sketchy though they are, are also regarded as suspect.
It’s the detail that hasn’t been given that is causing the most concern, however. All three parties have failed to produce credible plans to plug the deficit, with holes in each of their manifestos of the order of £30 billion. The only way to plug a gap of that scale is by imposing massive spending cuts or huge tax rises; or both. But that is something voters certainly won’t be told before polling day.
Fiona Walsh writes for the Guardiannewspaper in London
