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Noreena on the Numbers: Draft Labour Manifesto

Jeremy Corbyn gives a thumbs up on the campaign trail in London. Credit: PA

These are some initial thoughts on some of the key policy announcements in the draft Labour manifesto.

Yesterday we learned about many of Labour’s education plans.

Today we learnt that in addition they propose the scrapping of university tuition fees.

Whilst it's not clear exactly how much this would cost it's probably of the order of £11 billion.

Combined with their other education commitments, this would likely max out the revenue they expect to get from increasing corporation tax (£19.4 billion).

Corbyn missed the Labour poster launch in the wake of the 'manifesto leak'. Credit: PA

With regards the £6 billion extra spending on health they propose, and the additional £8 billion on social care.

First question is, is this enough?

The NHS funding shortfall is predicted to be vastly in excess of £6 billion.

Second, can the proposed increases in health and social care expenditure be covered by the tax increases and cost savings they propose?

They say these will be covered in part by the increases in taxes those earning over £80,000 will pay.

But as no further detail was provided in the draft manifesto on this tax policy, we don't know yet how much more those earning over £80k will pay and how much this will raise.

And whilst they say that any shortfall will be covered by their plan to increase tax on private medical insurance and halve the fees to management consultants – again how much these would raise was not spelled out in the draft manifesto.

Will health and social care spending be covered by Labour's manifesto?

On their proposed borrowing to invest £250 billion in infrastructure over the next 10 years.

If you believe the economy is demand deficient and that such investment will end up boosting productivity, you might well conclude that this is a sensible policy, especially given how low borrowing rates are.

However this will have implications for the deficit which may well worry others.

Finally, the next three points on the debt and deficit seem pretty sensible.

  • The additional flexibility Labour are providing themselves on the deficit and debt pledging to eliminate current spending deficit over a rolling five- year timescale
  • Lower debt as a proportion of trend Gross Domestic Product (GDP) at the end of each Parliament
  • Giving the Office for Budget Responsibilty (OBR) a clear mandate to say if government is breaching rules

But is the fiscal credibility rule overly flexible?

It can be easy for the government to disagree with the OBR’s assessment of the trend.

Whilst the five-year rolling window does not provide much of a current incentive to be fiscally responsible.