|Date:||03 May 2015|
|Publisher:||Associated Newspapers Ltd|
This article was first published by the Daily Mail and has been reproduced here in full with permission.
The election may be only three days away now but there is still an awful lot we don’t know about what economic and fiscal policies the two main parties would be likely to follow in government. The cacophony of promises and counter promises on taxes, benefits, public services and deficit reduction has been deafening and have left as much hidden as they have revealed about what the parties would actually do. But they do give a sense of real differences between the parties.
We still don’t have any real idea exactly how the Conservatives would reach their incredibly challenging deficit reduction target. Tens of billions of pounds of spending cuts, or tax increases, will be required. They have spent two years talking about cutting the welfare bill by £12billion whilst providing almost no detail on how – what combination of child benefit, tax credits, housing benefit and disability benefits do they propose to cut?
Labour meanwhile has been remarkably reluctant to spell out details of quite how much deficit reduction it wants to do. We know that Mr Balls wants to reach a surplus on day-to-day spending – but we don’t know by when, and we don’t know how much of a surplus. Answers to those questions matter a lot.
So there’s much that we don’t know. But we do know the broad outlines of what the two big parties are looking to achieve, and we do know that there are genuinely big differences between them. Arguably there are bigger differences in fiscal policy between the two main parties than at any time since at least 1992. For whatever the exact nature of Labour’s plan it is clearly different to the Conservative plan. Looking for a surplus on the current budget by the end of the parliament would allow Labour to be borrowing £25billion or more a year to fund investment spending. In principle it would require little in the way of additional spending cuts after this year. Contrast that with the sharp spending cuts required by the Conservatives. It’s a similar story with tax policy. There are some similarities. Both big parties say they won’t raise the main rates of income tax, National Insurance or VAT. Both want to clobber high earners who save in a pension. And both seem convinced they can extract eye watering (and highly uncertain) sums from tax avoiders.
But again there are big differences. The Conservatives say they will cut income tax further. Labour plans a series of additional tax rises – including the mansion tax and the reintroduction of the 50 per cent income tax rate. Both may have other plans that they are not revealing quite yet. I wouldn’t rule out further tax rises – though it would look odd for the Conservatives to introduce tax increases, having said they would outlaw many possible tax rises for five years.
Taking their plans at face value, a Conservative government would mean no net tax rise, a much tougher time for public spending and for many working age benefit recipients, and less borrowing. A Labour government would mean net tax rises, smaller cuts for public services, potentially no significant cuts to benefits, but more borrowing.
What we don’t have from any party is a clear long term direction for some of the big issues facing us. There is no sense that anybody wants to begin to sort out an unnecessarily complex, inefficient and economically costly tax structure. There is no sign of any recognition that the pressures put on health and pension spending by an ageing population may require rethinking public spending quite fundamentally. There is little convincing on dealing with the country’s housing problems. You wouldn’t know from what they say that we are facing something of a productivity crisis. We don’t know as much as we’d like about tax and spending plans.
But is there a choice? Yes there is.