Labour and Tories clash over £2,000 tax claim - so who is right?

The Tories have doubled down on the Labour tax claim despite the fact a letter from the top Treasury civil servant undermines the figure, ITV News Economics Editor Joel Hills and Political Editor Robert Peston discuss

The UK's official statistics regulator has launched an investigation into Rishi Sunak's claims that Sir Keir Starmer will increase taxes by £2,000 per household, which Labour has refuted.

Mr Sunak's claim was one of the hot topics of his Tuesday night head-to-head live ITV showdown with Sir Keir. He repeated several times that Labour's policies will be funded at the expense of a tax uplift for working families - something Sir Keir called "absolute garbage".

It has descended into a bitter row, with Labour calling on Mr Sunak to correct the record after he "embarrassingly" got the sum wrong and today launching a social media campaign calling him and the Tories "liars". Meanwhile, Mr Sunak and his party continue to double down on the tax claim.

However, a leaked letter from the Treasury's senior official casts further doubt on the prime minister's statement.

The Office for Statistics Regulation has confirmed it is looking into the use of the £2,000 figure.

So, who is right?

Where has the £2,000 figure come from?

Labour has not said it has plans to increase a working household’s tax by £2,000.

It is understood the figure is based on an estimate produced by the Conservative Party - which the Labour Party disputes - and would be spread over four years.

Initial analysis by charity Full Fact also said the prime minister's claim was based on Conservative estimates of Labour spending plans and covers a long list of policy announcements.

Rishi Sunak repeatedly made the claim during the debate

This claim is understood to have come from a document produced by the Conservatives, titled Labour Tax Rises and is dated May 17. That document makes a series of assumptions to estimate the cost that might be attached to potential Labour policies should they get into government.

It claimed the difference between the money Labour would raise from its policies, and the amount it would spend, would lead to a deficit of £38.5 billion over a four-year period.

The Conservatives say Labour’s plans to increase the revenue coming into the Treasury would collect £6.2 billion a year by 2028/29, therefore generating £20.4 billion over the next four years.

The Conservatives argue that this would leave a gap between spending and tax revenues of about £10 billion in 2028/29. Spread out over a four-year period, this figure then reaches the calculated £38.5 billion.

The document says a Labour government would have the option to raise this money by increasing taxes, but alternatively it could borrow to cover the cost.

According to the Conservatives, to fund this £38.5 billion financial "black hole" a Labour government would have to implement a tax increase of £2,094 for every working household. This figure is calculated on the basis that there are 18.4 million working households in the UK.

Who carried out the tax calculations?

According to the Tory document, some of the estimates have been carried out by civil servants at the Treasury using assumptions provided by Conservative Party special advisers. But other calculations were not provided by the civil servants.

The Conservatives claim the figures and conclusions were the result of an official analysis by the Treasury and, therefore, independent of party politics.

However, the Treasury's senior official has urged ministers - in a letter leaked to media - not to attribute the Tories' claim that Labour's policies would cost £38.5 billion to civil servants. This therefore casts doubt on the tax claim.

The letter sent by Permanent Secretary to the Treasury James Bowler. Credit: PA

In a letter dated June 3, Treasury Permanent Secretary James Bowler said the calculation “includes costs beyond those provided by the Civil Service”.

Writing to Shadow Treasury Chief Secretary Darren Jones, he said: “Costings derived from other sources or produced by other organisations should not be presented as having been produced by the Civil Service.

"I have reminded ministers and advisers that this should be the case.”

Paul Johnson, director of the Institute for Fiscal Studies (IFS), said: “The £2,000 per working household that the Conservatives are suggesting Labour is committed to is not independently arrived at or verified.”

The government's original costings on a number of individual policies by Labour can be found here.

What has Labour said?

Labour has vehemently disputed the figures in the document and has launched a fierce campaign on social media today claiming "the Tories are lying to you" and "Rishi Sunak lied to you... just like he did about Partygate".

But many questioned why the Labour leader did not rebut the claim the first time Mr Sunak raised it during Tuesday night's debate.

After the prime minister repeated the claim several times during the showdown, Sir Keir finally called the claim "absolute garbage" and clapped back: “What’s happened here is they put in pretend Labour policies to the Treasury and then they get a false readout.

“What they’ve put in for this analysis is a mental health policy that isn’t the Labour Party’s policy, he’s put in one of his own policies. He’s asked the civil service to cost it.

"They’ve come up with this figure of £2,000.”

Shadow Chancellor Rachel Reeves said the letter from the Treasury official "confirms what Labour said last night that the prime minister lied in the debate".

"Labour has no plans to increase taxes on working people. In fact, I already ruled out increases in income tax, national insurance and VAT for the duration of the next Parliament," she added.

The Labour Party insisted the report "was commissioned for a now discredited Policy Exchange report and has been misquoted on a number of occasions by the prime minister, chancellor, and energy secretary.

"The authors of the report have confirmed their analysis that Labour's plans cuts bills by twice as much as the Conservatives’ discredited policies, in half the time."

Labour insisted said this is because Mr Sunak "has left out the ongoing cost of gas which the Tories will require in the five years they will delay getting to clean power.

"Once that is accounted for, the Tories plans will cost more than Labour’s - with Labour’s plans bringing double the savings in half the time."

Labour has yet to release its full manifesto for the General Election and potential costings.

Shadow Secretary Ed Milliband said: “Truth matters in politics - Rishi Sunak got his sums wrong and should be brave enough to admit it. His own analysis shows his plan will cost the country more and leave our country exposed.

“The report he cites in fact confirms that only Labour has a plan to end 14 years of high energy bills under the Conservatives by investing in clean homegrown power through Great British Energy, our publicly owned energy company, to cut bills and make Britain energy independent.

“It's back to the flip chart for Rishi.”

What have the Tories said?

In his initial statement at the ITV debate, the PM had said: “Beyond raising your taxes and raiding your pensions, no-one knows what Labour would actually do.

“But you know what I would do? I’ll cut your taxes, protect your pension and reduce immigration.”

Expanding on the accusation later in the show during a debate about climate change, Mr Sunak said Sir Keir would “reverse all of the changes I’ve made” which would “cost everyone and you thousands of pounds.”

Mr Sunak said repeatedly there would be "£2,000 higher taxes for every working family" under a Labour government.

He later doubled down by sharing a clip on X of himself during the debate making the claim and today continued to share posts, with one saying simply "£2094" along with a video of his words from the debate.

Energy Secretary Claire Coutinho today told ITV News: "I thought Keir Starmer was really exposed last night because whether it was on immigration, or the NHS, or the £2,000 of extra taxes that the Labour Party policies would cost working families, he didn't have any answers at all."

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