IFS manifesto analysis: Neither Tories nor Labour ‘being honest’ with voters about tax hikes

Neither the Conservatives nor Labour are “being honest” with voters about the tax hikes that will be needed to fund their spending plans, economists say.

The general election manifestos of both of the big parties are strongly criticised by the respected Institute for Fiscal Studies for failing to provide a “properly credible prospectus” for government.

Its analysis points out the vast gulf between cautious Tory plans, which offer little change, and radical Labour and Liberal Democrat proposals, saying: “Rarely can a starker choice have been placed before the UK electorate.”

But its key message attacks the big parties’ calculations, concluding: “While the Conservatives continue to pretend that tax rises will never be needed to secure decent public services, Labour pretends that huge increases in spending can be financed by just big companies and the rich.

“In this respect neither Labour nor the Conservatives is being honest with the electorate.”

The analysis also highlights the high risk of a no-deal Brexit at the end of 2020, if Boris Johnson wins the election, after he ruled out extending the transition period during which the UK will remain aligned with the EU.

Calling it another “die in a ditch” style promise, the IFS said: “That would harm the economy and of course increase the debt and deficit.”

And it warned the Tory prospectus would leave spending on public services other than health a striking 14 per cent lower in 2024 than when austerity began in 2010.

“No more austerity perhaps, but an awful lot of it baked in,” said Paul Johnson, the IFS director.

The criticism of the tax plans comes after Labour pledged to spend an extra £83bn a year by the end of the next parliament, while the Tories said spending would rise by only £3bn.

Mr Johnson ruled out any tax rises, while Jeremy Corbyn unveiled a detailed package of £83bn of hikes, almost exclusively raised from the rich and big business.

The IFS has dismissed the chances of the Conservatives holding down spending as intended as “remote” and not to be believed.

The Tories are being modest in their proposals to avoid “being up front about the need for tax rises” if a separate pledge to balance the budget is to be achieved, the IFS said.

“It is highly likely that the Conservatives would end up spending more than their manifesto implies and thus taxing or borrowing more,” the document said.

Similarly, it concluded: “It is highly likely that Labour, at least over the longer term, would need to implement other tax-raising measures in order to raise the £80bn of tax revenue that they want.”

Under Labour, “both taxes and spending would rise to peacetime highs” – but its vision is “not so dissimilar to those seen in many other successful western European economies”.

“Labour’s proposed increase in the size of the state would still leave UK public spending at a lower share of national income than that seen in Germany,” the document said.

“Water companies are more often than not in public ownership. And, for example, collective pay bargaining is widespread in many European economies.”

Chancellor Sajid Javid said: “Independent experts have confirmed today that Jeremy Corbyn’s plans would mean millions people more paying higher taxes – leaving his manifesto promises lying in tatters. Corbyn can’t pretend that it’s only the rich or businesses that will pay the price for his plans. It is the many, not just the few who will be hit with higher taxes – as he was forced to admit."

But shadow chancellor John McDonnell responded: "The IFS assessment of Labour's plans is that we are too ambitious – we accept that with pride. We are ambitious for our country and will be investing on the scale needed to end austerity, tackle climate change and build our country’s future.

"What is also clear from the IFS is that under the Conservatives there will be no change and austerity will continue to undermine our public services."

Liberal Democrat deputy leader Ed Davey said: "This damning assessment shows that neither the Tories or Labour have a credible plan for the economy. Both are failing to come clean with the electorate and ignoring the Brexit black hole their plans would leave in the public finances. Everyone knows you can't have something for nothing, but both the Tories and Labour are pretending you can.

"Only the Liberal Democrats are being frank about your money and how we'd spend it. We will stop Brexit and invest the £50 billion Remain bonus in tackling inequality, improving our vital public services and strengthening the economy."