Labour's manifesto leaves unpopular decisions until after the election

Bold, cautions and hopeful: ITV News Economics Editor Joel Hills breaks down his suspicion that barring a positive economic shock, Labour will spend more than their manifesto suggests and raise taxes it hasn't yet set out

Labour’s manifesto is a mix of the bold, the cautious and the hopeful.

On tax, it’s cautious. VAT on school fees, windfall taxes on oil and gas companies and a crackdown on tax avoidance will raise £8.5 billion by the end of the parliament. 

Sounds a lot, but the Lib Dems would raise £26.8 billion and the Tories promise tax cuts.

Like the Tories, Labour is keeping the freeze to the threshold of Income tax and national insurance so the overall tax take would rise significantly under a Labour government.

As a share of national income, the Resolution Foundation says it would increase by 0.9% - the equivalent of £1,100 a year per household. 

Labour and the Conservatives differ on tax, but not massively. Credit: PA

There is a difference between the two main parties on tax but it’s not a radical one.

Both would take the tax burden in the UK back to its highest level since the 1940s. In the case of a Labour government, it would reach 37.4% of GDP, under a Tory government it would reach 36.8% of GDP.

On spending, Labour’s big commitment is the Green Prosperity Plan which it plans to part fund by a small increase in borrowing.

Otherwise, the modest sums of extra tax would be targeted at much-needed areas of health and education - providing 6,500 new teachers for example.

Warning: as it stands, unprotected public services - councils, prisons, courts and universities - face annual cuts of up to £20 billion a year after the election. 

Labour’s manifesto doesn’t fill this hole.

“Like the Conservatives and the Liberal Democrats, Labour continues in a conspiracy of silence on the difficulties they would face.,” says Paul Johnson, Director of the Institute for Fiscal Studies (IFS) 

Johnson adds: “These challenges are already perfectly clear. The books are open. A post-election routine of shock and horror at the state of the public finance will not cut it.”

The manifesto does promise “no return to austerity” but doesn’t spell out what that means. It also promises to get “debt falling as a share of the economy” over a five-year period and not to “increase taxes on working people.”

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But all of these promises depend on Labour managing to kickstart economic growth. 

Labour has a strategy, and much of it is considered sensible. None of it will deliver an instant boom.

Planning reform to build 1.5 million new homes in the next parliament is bold and has the potential to create tens of thousands of jobs, as well as easing pressure on housing.

But that’s a run rate of 300,000 new homes a year - we last achieved that in the 1970s. 

And according to the Centre for Cities, we need 4.3 million new homes to meet current demand.

The government’s forecaster, the Office for Budget Responsibility (OBR), thinks the UK economy will grow by an average of 1.8% a year during the next parliament. 

Shadow chancellor Rachel Reeves reads the Labour Party's manifesto during the launch event. Credit: PA

That’s strong by recent standards but the forecast is also considered optimistic. And even if that level of growth does suddenly materialise, tough choices look unavoidable.

A Labour government may get very lucky, and the outlook for the public finances could be transformed for the better. But banking on luck is not a very good strategy and if the economy remains stuck in the same low gear it has been in since 2008 we do not know how Labour would respond.

The suspicion has to be that, barring a positive economic shock, a Labour government would end up spending more than its manifesto suggests and would raise taxes in ways it hasn’t set out.

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