ANALYSIS:The Lib Dems have a reputation for being shrewd on the economy, but their manifesto looks badly costed, writes MARK HENNESSY
POLITICIANS CANNOT win, really. If they produce manifestos light on detail, they are skewered for insulting the public. If they do supply facts and figures, these are picked apart.
For almost two years, the Liberal Democrats have established a reputation on the economy, largely due to treasury spokesman Vince Cable, who has been awarded the status of “seer” by many in Britain.
Lib Dem leader Nick Clegg said at his party’s manifesto launch in Bloomberg’s offices in the City of London that Labour and the Tories have tried to “airbrush the recession out of the election”, happy to fight battles on the sidelines.
The Lib Dems would not follow suit, he said, as the manifesto set out £15 billion (€17 billion) a year of spending cuts. It also makes clear that more funds would have to be found, and higher taxation could not not be ruled out.
The party’s figures, however, according to the Institute of Fiscal Studies, would produce little more than a quarter of the cuts needed to match chancellor of the exchequer Alistair Darling’s timetable for 2013/14, and even less than is required for the three years following.
For months the Liberals have been promising to ensure that no one would pay tax on the first £10,000 of income, so that “fairness is hard-wired” into British society. However, Clegg’s attempt to imply, as he did yesterday, that this would leave most of those in the middle-income tax band better off does not stand up to scrutiny.
The eye-watering £17 billion-a-year bill would be paid for with various measures, including: cutting pension tax relief from the marginal to the standard rate, saving £5.5 billion a year (and costing three million people dearly); more aviation taxes, saving £3.4 billion; and ensuring that capital gains tax is charged at 40 per cent, and not today’s rate of 18 per cent.
The party, however, was quickly taken to task for its plan to raise £4 billion extra in taxes by clamping down on tax avoidance and evasion. Some in the accountancy world say that Her Majesty’s revenue and customs would long since have found a way of doing this, if it could be done. But Clegg argues that £40 billion a year is lost in loopholes, so a target of £1 in every £10 is not unrealistic.
However, new loopholes have a way of appearing when old ones are closed, while the plan, which proposes the setting up of a new commercial arm in revenue to advise companies on the legality of their tax moves, would do well to reap the £1.4 billion a year required for the Lib Dems’ figures to add up.
The party also believes that the cost of prisons can be cut by £700 million if people sentenced to less than six months in jail can be put to work on rigorous community service. This may be socially sensible, but it does not fit the trend of the last decade, when prison numbers have soared.
The Lib Dems cannot afford to have holes in their figures. Last year they were left red-faced after Cable blundered by first proposing a tax on £1 million houses, which he said had been fully costed and agreed with colleagues, only to have to back down and raise the threshold to £2 million houses in the face of consternation from some.
For now, Labour has been less critical than the Tories in its criticism of Clegg, in case Gordon Brown needs him after the election. David Cameron, however, has sought to bypass Clegg, urging Liberal voters in key marginals to vote for him if they want to get Labour out.