IFS: Neither Conservatives nor Labour being honest about economic consequences of their manifestos

The Conservatives' aim of balancing the budget by the mid-2020s would "likely require more spending cuts or tax rises even beyond the end of the next parliament", an influential think tank warns today. The Institute for Fiscal Studies has carried out a detailed study of the Conservative and Labour manifestos, criticising both parties for failing to properly spell out the consequences of their proposals.

Carl Emmerson, the IFS deputy director, said: "The shame of the two big parties' manifestos is that neither sets out an honest set of choices.

"Neither addresses the long-term challenges we face.

"For Labour we can have pretty much everything - free higher education, free childcare, more spending on pay, health, infrastructure.

"And the pretence is that can all be funded by faceless corporations and 'the rich'."

"The Conservatives simply offer the cuts already promised ... Compared to Labour they are offering a relatively smaller state and consequently lower taxes. With that offer comes unacknowledged risks to the quality of public services, and tough choices over spending."

The IFS said it was likely that the Tories would have to resort to increasing tax or borrowing in order to "bail out" public services to present their decline during a proposed continuation of austerity measures. Withdrawing the winter fuel allowance from wealthier pensioners and scrapping the triple lock on pension increases is "a nod towards dealing with the costs of ageing" but "would make a whole trivial difference to spending", it said.

Jeremy Corbyn's manifesto pledges would increase spending "to its highest sustained level in more than 30 years" and raise taxes to their highest ever peacetime level. The IFS concluded that the costings for Labour's generous giveaways "would not work" because it would be impossible to raise as much money as the party claims it could. It also said "there is no way" that Labour's plans for tens of billions of pounds of tax rises would affect "only a small group at the top" as the party has claimed.

Instead their pledge to increase taxes for companies would reduce the incomes of ordinary workers through lower wages, higher prices, or lower investment returns.

Labour has said it would raise £49 billion per year from taxing the "rich" and companies.

But the IFS said the calculation includes "factual mistakes" and "optimistic assumptions" - creating a £9 billion shortfall.

"Their proposals could be expected to raise at most £40 billion in the short run, and less in the long run," the IFS research concluded.

The IFS also warned that Labour's proposals to set the minimum wage to at least £10 per hour by 2020 are "a gamble". "We simply don't know beyond what level a higher minimum wage would start having serious impacts on employment", if companies cannot afford to pay the higher wage, Mr Emmerson said.

Meanwhile, Mr Emmerson said that the "steady as she goes" mantra that the Conservatives appeared to be selling in their manifesto would mean significant cuts to welfare spending and another five years of austerity for public services, including "real cuts to per pupil funding in schools."

"It is not clear if this would be deliverable," he said.

The IFS also suggested that the Conservatives may need to find "additional tax raising measures" if the party wins the election and goes on to make more generous spending plans, as it did after the 2015 election.

http://www.telegraph.co.uk/news/2017/05/26/tory-plan-balance-budget-mid-2020s-could-require-tax-rises/