Why the Tories may struggle to fund the tax cuts they've pledged

“Vote Tory, pay less tax.” That’s the pitch.The manifesto sets out tax cuts worth £17.2 billion a year by the end of the next parliament.If re-elected, the Tories say they would cut the rate of National Insurance to 6% by April 2027 for employees.And phase-out the tax altogether for the self-employed, over a five year period.The Institute for Fiscal Studies (IFS) calculates someone on average earnings of £35,000 a year would pay £300 less if the full cut was introduced.The saving is not higher because the Tories would continue to freeze the thresholds of national insurance and income tax for several years until 2028.As for the tax burden, this cut would be a drop in the fiscal bucket. The overall tax take would continue rising north of £1100 billion.

Tax as share of GDP is currently forecast to reach 37.1% in by 2028/29 - the highest level for 80 years.The Tory manifesto pledges would bring that down to 36.5% - still the highest level for, erm, 80 years.In addition to tax cuts, the Tories promise a big increase in defence spending.The manifesto says these would be funded by cuts to welfare spending, a crackdown on tax avoidance, layoffs in the civil services and “quango efficiences” - whatever they might be.Sceptical? You’re not alone.Take welfare. Spending shot up in the last parliament.The number of people getting one health-related benefit has soared from 3.2 million to 4.2 million since the pandemic and is forecast to continue rising.

In addition to tax cuts, the Tories promise a big increase in defence spending. Credit: PA

The Tories say they will save £12 billion a year by holding financial support at current levels.That would be a challenge. New claims for disability support are coming through at a rate of 40,000 a month.“We’ve had a doubling in the numbers applying for disability benefits,” says Paul Johnson of the IFS. “It’s entirely reasonable for a government to think about how to tackle that. But can they get £12 billion? You can see why they would want to but not how.”The risk here is the Tories get elected, don’t get the savings they want and have to borrow to fund tax cuts and extra defence spending.And it’s not clear they would be able to do this because the Tory manifesto also contains a pledge to get debt falling as a share of national income over a five year period.As the IFS and the The Resolution Foundation have repeatedly pointed out, keeping to that rule already means another Tory government would need to find cuts of up to £20 billion from unprotected public services, like prisons, the courts and local authorities.And the manifesto does not tell us where these cuts can be found.The Tory election strategy appears to be generate numbers to measure the “black hole” in Labour’s plans while refusing to engage with the hole they would face if returned to power.

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