IFS warns Conservative manifesto lacks NHS ‘overall spending plan’

Conservative Party policy chiefs have not set out an overall spending plan for health and social care in England, a think tank has warned.

The Institute for Fiscal Studies (IFS) has published a detailed response to the Conservative Party’s manifesto.

In it, economists set out that tax threshold freezes in the last Parliament could leave pensioners paying more than they did in 2019.

This is despite a proposed uprated income tax personal allowance in line with the triple lock, which could cut their income tax from current levels by £130 per year by 2029-30.

On the NHS, IFS associate director George Stoye said: “Beyond an almost meaningless commitment to increase NHS spending above inflation each year (it always gets more than inflation), there was a striking lack of detail on what financial resources will be made available to the NHS over the next parliament to deliver these commitments.”

IFS researchers have found only five years between the mid-1950s and the pandemic when UK health spending failed to keep up with inflation.

“The manifesto reiterates the government’s commitment to implementing the NHS workforce plan,” the response notes.

“It also promises substantial improvements in NHS performance by returning to constitutional standards, many of which have not been met for a decade.

“Achieving these promises will require the NHS budget to grow substantially faster than inflation over the next Parliament, almost certainly needing growth of upwards of 3% above inflation each year.”

On public services spending, the IFS response reads: “Manifesto promises to increase spending, primarily on defence, have been funded largely through cuts to the Civil Service headcount, consultancy spending, and ‘quango efficiencies’, cutting down on options for making the implied further cuts to funding for unprotected services.”

On cuts, “the Conservatives have largely remained silent on where these will fall”, think tank analysts added.

IFS director Paul Johnson said: “The Conservatives have promised some £17 billion per year of tax cuts, and a big hike in defence spending.

“That is supposedly funded by reducing the projected welfare bill by £12 billion; cracking down on tax avoidance and evasion; and saving billions from cutting Civil Service numbers, reducing spending on management consultants, and “quango efficiencies”.”

He added: “The trouble is the policies that have been spelled out are not up to the challenge of saving £12 billion a year.

“Some have already been announced and included in the official fiscal forecasts; others are unlikely to deliver sizeable savings on the timescale that the Conservatives claim.

“The hope seems to be that, since spending on disability benefits is rising rapidly, one can simply “reform disability benefits” and hold spending down.

“But halving the number of people that successfully apply for disability benefits from its current level would not be easy and would need definite, clear policies that require difficult decisions.

“These are not stated.”

Mr Johnson continued: “What the manifesto did not tell us was where the £10 to £20 billion of cuts to spending on unprotected public services, as implied by the March Budget, might come from.”

Think tank economists believe most workers would pay less tax if the Conservatives are elected.

Tom Wernham, research economist at the think tank, said: “The biggest tax policy is the pledge to cut the main rate of national insurance contributions (NICs) from 8% to 6% and to abolish the main rate of self-employed NICs.

“Combining this change with other changes since 2019, including the ongoing freeze to tax thresholds, most workers would be paying less tax by the end of the next Parliament than they would have been paying under an unreformed 2019 system.”

But Mr Wernham added: “Under the proposed changes, a basic-rate taxpayer would face a marginal tax rate of 20% if they are self-employed vs 35% if they are an employee.

“Increasing the tax advantage for self-employment relative to employment is a move in the wrong direction. Preferential rates for the self-employed are unfair and not well targeted at boosting entrepreneurship.”

An employee working full-time on the minimum wage would see taxes increase by £240 from 2019–20 to 2029–30, while a self-employed worker earning the same would see a £300 tax cut, the IFS found.

Economists also concluded that a pensioner paying the basic rate of tax would be paying £490 a year more in tax in 2029–30 than under the 2019-20 tax system, as a result of decisions taken in the previous Parliament.

The Resolution Foundation, a think tank focused on reducing poverty and improving living standards, welcomed the spirit of the tax cuts but said there was “scant detail” about how they would be paid for under current spending arrangements.

Mike Brewer, interim chief executive of the Resolution Foundation, said: “There are big questions over whether doubling down on firm tax commitments, funded by pledges to massively cut spending in record time, really passes the plausibility test, or whether this approach answers the big economic challenge Britain faces on growth.

“The unspoken issue looming over this manifesto is that it will only take a small dose of bad economic news for these plans to fall foul of the fiscal rules, and for a future Conservative government’s tax and spend plans to have to return to the drawing board.”