Britain’s election campaign has turned into a contest between the main party leaders to determine who can promise to spend the most money, despite concerns that the country’s economy has slowed to a crawl and Brexit uncertainty has intensified.
On Thursday the Labour Party promised a sweeping overhaul of the economy and an increase in public spending and taxes to levels not seen in generations. The party is promising “the most radical and ambitious plan to transform our country in decades,” leader Jeremy Corbyn said after unveiling his party’s platform in Birmingham.
Labour’s manifesto calls for massive spending increases for health care, social programs, infrastructure and education. The party also wants to nationalize huge parts of the economy, including energy suppliers, railway operators, the Royal Mail – which was privatized in 2013 – water companies and the internet arm of telecom giant BT. A Labour government would also force companies to give employees a 10-per-cent ownership stake, and any publicly traded company that fails to combat climate change would be delisted from the stock exchange, according to the manifesto. The party also plans a host of giveaways, including free broadband for everyone, free basic dental care, free postsecondary education and a program to upgrade every home to “the highest energy-efficiency standards.”
To pay for it all the party would dramatically increase taxes on high-income earners and corporations. It would also introduce a special levy on oil companies to raise £11-billion for a green energy program. Government borrowing would also rise by at least £400-billion ($685-billion) over several years.
“It is impossible to understate just how extraordinary this manifesto is just in terms of the sheer scale of money being spent and raised through the tax system,” Paul Johnson, director of the Institute for Fiscal Studies (IFS), an economic think tank, told ITV Thursday. “These are vast numbers, enormous, colossal, in the context of anything we’ve seen in the last – ever, really.”
Mr. Corbyn is hoping the ambitious agenda will boost his party’s flagging campaign and tap into growing discontent over the state of the National Health Service and years of cuts to government programs. He released a similar platform during the 2017 election campaign, and it proved so popular that Labour almost won. This manifesto goes much further, and it’s not clear if voters are convinced Mr. Corbyn can deliver on the commitments. Labour has been trailing the Conservatives in most opinion polls, and a poll released yesterday by Ipsos MORI still puts the Tories 16 points ahead.
Mr. Corbyn said little about Brexit Thursday, hoping to shift attention to health care and other issues. That’s also because the party’s position on Brexit has been confusing. Mr. Corbyn has promised to negotiate a new withdrawal agreement with the European Union and then hold a referendum offering a choice between the deal or remaining in the EU. But he hasn’t said how he would vote.
The Conservatives and Liberal Democrats have also picked up on Labour’s success in 2017, with both parties promising big spending increases as well this time. The Liberal Democrats released their platform earlier this week, and it called for £76-billion in extra spending on social programs and infrastructure. The Conservatives will release their manifesto on Sunday, but just before the election was called, Prime Minister Boris Johnson announced the biggest increase in government spending in 15 years. The Conservatives have also dropped plans to cut corporate taxes, and the party is vowing to expand a free child-care program and hire 20,000 police officers. Mr. Johnson has also argued that the Brexit deal he negotiated with the EU is “oven ready” and would end the uncertainty and lead to more government spending.
The proliferation of spending promises has raised concerns at Moody’s, which recently downgraded its outlook for Britain from stable to negative. The credit-rating agency said that after years of austerity it expected Britain to begin reducing its debt burden. “Now, Moody’s sees little appetite or opportunity for that to happen,” the firm said in explaining its recent downgrade. “In the current political climate, Moody’s sees no meaningful pressure for debt-reducing fiscal policies. In fact, there is rising pressure for spending increases with little apparent clarity as yet on how they might be financed through additional revenues and little scope for politically acceptable expenditure cuts.”
Economists at the IFS have also warned that, whichever party wins the election, the next government will face a tight fiscal position. Last March the Office for Budget Responsibility, a government agency, forecast a budget surplus of £37-billion in three years, largely due to years of austerity and savings the government will enjoy once Britain leaves the European Union and no longer has to contribute to EU budgets. However, an analysis by the IFS found that most of that surplus has now vanished, mainly because of Mr. Johnson’s announced spending increases and some accounting changes, including the treatment of unpaid student loans. Overall, the IFS said, “significant tax cuts or increases in day-to-day spending need to be paid for not by further increases in borrowing but instead by tax rises or spending cuts elsewhere.”
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