All parties are putting forward nice-sounding policies and promising that they’ll be paid for by someone else, says Matthew Lesh
“Our plans are fully funded and fully costed,” proudly declares every party leader when presenting their election manifestos.
It’s not difficult to understand why this is so important. Politicians are trying to run a gigantic government machine that spends over a trillion pounds each year. Being responsible with the nation’s finances is an obvious prerequisite.
The perception that the plans are fiscally irresponsible can be electoral suicide. Jeremy Corbyn faced this problem. In 2019, Labour announced policies that polled well on the surface. These included nationalising industries, ending increases in the state pension age, and even ‘free broadband’. Yet, taken together, few thought these expensive promises were believable. They simply did not add up.
Although this election campaign may involve less radical policies, we should be just as sceptical of the manifestos announced in recent days. They are full of nice-sounding yet uncosted and unexplained promises and new commitments, inevitably to be paid by ‘someone else’.
The Liberal Democrats’ manifesto was a masterclass in this technique. Ed Davey and co act as if simply putting something on the page will make it a reality. They have, for example, committed to “a new right” to see a GP within seven days and guaranteed access to dentists — yet there’s no detail on the reforms necessary to achieve these goals. What will happen if your ‘right’ is not met? It’s entirely unclear.
The Lib Dems also want to raise £27bn by taxing banks, energy companies, and digital giants. There’s even a proposed tax on share buybacks, that will likely raise nothing as companies will respond by increasing dividends. Labour will similarly go after ‘windfall’ gas profits, non-doms and private schools. Not to be outdone, the Green Party has announced planned tax rises of an astonishing £170bn, including a new wealth tax.
All these baddies are easy targets. But it’s unlikely to be a costless exercise nor will it raise the amounts suggested. The second-order effects of these tax increases will be less investment, higher prices, lower-paid jobs and, ultimately, less growth. This decreases tax revenues in the longer run too.
The Tories, along with all the other parties, say a large chunk of revenue will come from ‘cracking down on tax avoidance’. This does not make for full costing. While everyone hates tax cheats, nobody can really know how much giving HMRC more money will achieve.
This is all before getting to the other major uncalculated burden: the cost of new regulations.
Labour plans to increase the minimum wage and ban ‘exploitative’ zero hour contracts. The Lib Dems have promised everything from more financial services regulation to new laws cracking down on puppy and kitten smuggling. The Tories are pushing ahead with costly requirements on all nighttime venues to develop terrorism prevention plans, introducing a football regulator, and a new licensing scheme for Botox and fillers.
It’s much easier for politicians to make these sorts of commitments than those with an explicit spending requirement. These policies may even have a certain appeal. But again, they will impose costs on millions of businesses and individuals. Notably, no party has attempted to even begin to calculate the real-world effects of their proposals.
The manifestos are expansive documents promising so much. Yet it’s important to remember that politicians who give with one hand almost inevitably take away with the other.
Matthew Lesh is the Director of Public Policy and Communications at the Institute of Economic Affairs