Tories and Labour both lack 'credible' plans for public finances, IFS says

Prime Minister Boris Johnson and Labour leader Jeremy Corbyn
Prime Minister Boris Johnson and Labour leader Jeremy Corbyn
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Neither the Tories or Labour have “credible” plans to manages the UK’s public finances, an independent think tank has warned.

The Institute for Fiscal Studies (IFS) said it was "highly likely" that a Conservative government would end up spending more than the party's manifesto implied - meaning either taxes or borrowing would have to rise.

It said that Labour would not be able to deliver on its promise to raise investment levels by £55 billion a year as the public sector does not have the capacity to "ramp up" that much that quickly.

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It was "highly likely" that a Labour government would have to find other tax increases beyond those it has announced for big business and the better off if it was to raise the extra £83 billion a year in additional revenues it wants.

"In reality, a change in the scale and the scope of the state that they propose would require more broad-based tax increases at some point," said IFS director Paul Johnson.

Mr Johnson said that the chances of the Conservatives being able to hold spending down over the course of a five-year parliament in the way that they proposed appeared to be "remote".

"Why have they been so immensely modest in their proposals? Because to do otherwise would either mean resiling from their pledge to balance the current budget or would mean being up front about the need for tax rises to avoid breaking that pledge," he said.

Labour's plans to scrap Universal Credit are “unwise”, the IFS said, warning that replacing the flagship benefit scheme would be “expensive, disruptive and unnecessary”. The think tank said the Tories had “failed to come up with any kind of plan or any kind of money for social care”, and the party's plans on welfare were “all but non-existent”.

Presenting the analysis of the election manifestos of the main parties, Mr Johnson said the choice between the Tories and Labour could "hardly be starker".

He said the Conservative plans if delivered would leave public spending - apart from health - still 14% lower in 2023-24 than it was when the Tories came to power in 2010-11.

"No more austerity perhaps, but an awful lot baked in," he said.

In contrast, he said that Labour would raise both taxes and spending to peacetime highs, with the national debt set to rise by around 3% of national income.

However, he said that Labour's promise to abolish in work poverty within a parliament was "not achievable".

And he expressed concern about about its pledge to commit £58 billion to compensate the so-called "Waspi women" who claim to have lost out as a result of pension changes under the coalition government.

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He said it mean spending more on a group who were on average "relatively well off" than the party was proposing to spend on the much larger and much poorer group of working-age benefit recipients.

"To believe the whole group should receive compensation is a recipe for complete stasis in policy," he said.

"Clearly some suffered hardship and there may be scope for much more limited compensation."