Neither of Britain’s two main political parties are going into next month’s election with credible tax and spending plans, a leading think tank said on Thursday.
Prime Minister Boris Johnson’s spending blueprint looked too small to ease the strain on stretched public services, raising the prospect of higher taxes or more borrowing down the road, the Institute for Fiscal studies said.
By contrast, the opposition Labour Party’s plan to tax and spend more than any previous British government in peace time was so sizeable it probably could not be delivered over the five years of the next parliament, the non-partisan IFS said in a report ahead of the Dec. 12 election.
“Neither is a properly credible prospectus,” it said in a report ahead of Britain’s Dec. 12 election.
After a decade of cuts to many public services, both Johnson’s Conservative Party and Labour are promising voters that austerity is about to end.
However, the IFS said the Conservatives’ plans would leave public spending, excluding health, 14 per cent lower in inflation-adjusted terms by 2024 than in 2010, when they began trying to fix the public finances after the global financial crisis.
Labour’s election proposals would lead to higher taxes for more than just the top 5 per cent of earners who the party said would have to pay more, and further tax hikes would probably be needed to fund its spending surge, the IFS said.
It said the uncertainty about both parties’ fiscal plans, layered on top of the lack of clarity about Brexit, meant it was hard to give detailed forecasts for Britain’s public finances.
Borrowing would probably be flat under the Conservatives but the economic shock of a no-deal Brexit would push up the budget deficit to 4 per cent of economic output, more than double its level now. Under Labour, the deficit would rise to about 3.5 per cent of output by 2024, the IFS said.
Separately on Thursday, another think-tank, the Resolution Foundation, said the rival spending promises meant both parties were likely to break their own fiscal rules.
“Taking huge risks with the brand new fiscal rules that are supposed to bind the next government for its whole time in office risks seriously undermining the UK’s economic credibility, at a time when it is already under strain,” Resolution Foundation research director James Smith said.
Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.