General election 2024: Do the spending promises stack up?

The major manifestos have now all been released, and it is fair to say that a few dodgy spending promises were thrown in alongside some very ambitious revenue raisers.

On the whole, the wonks were not impressed by 2024’s vintage of manifestos – but then, when are the wonks ever happy?

We’ve reviewed the three major parties’ policy pitches to determine whether their spending promises stack up. The answer, on the whole, is no.

Labour

With Labour so far ahead in the polls, this manifesto really matters. Basically everything in it had already been announced. Indeed, Starmer made a virtue of the lack of rabbits out of the hat. “I’m running to be Prime Minister, not to run a circus,” he said.

The manifesto included four tax increases, which were flagged a long time ago: abolishing the non-dom tax status, closing the carried interest loophole on private equity funds, introducing VAT on private schools and extending the windfall tax.

Labour confirmed it would not raise income tax, National Insurance and VAT. “We will ensure taxes on working people are kept as low as possible,” the manifesto said.

These measures will raise about £8.6bn (including a clampdown on tax avoidance), or about 0.2 per cent of GDP. This makes Labour’s fiscal package the smallest of the major parties. That money will go towards funding more NHS appointments and hiring more teachers.

Paul Johnson, director of the Institute for Fiscal Studies (IFS) argued the measures would likely fail to meet the challenges the next government would face.

“The public service spending increases promised in the “costings’ table are tiny, going on trivial. The tax rises, beyond the inevitable reduced tax avoidance, even more trivial,” he said.  

A big question hanging over this election has been what will happen to unprotected government departments, which will face cuts worth £19bn on current projections.

Labour had nothing to say about these departments, although Starmer ruled out a return to austerity. This makes further, unspecified tax rises likely.

“Like the Conservatives and the Liberal Democrats (spoiler), Labour continues in a conspiracy of silence on the difficulties they would face,” Johnson said.

The Conservatives

It almost feels pointless going through the rest of the manifestos, but since there is a remote possibility that Rishi Sunak will remain as Prime Minister (about as likely as Switzerland winning the euros), maybe it’s worth it.

*Sighs resignedly*

The centre piece of the Conservative manifesto was another 2p cut to National Insurance as well as a pledge to abolish the main rate of self-employed NICs. Alongside some other more minor tax cuts – including for pensioners and first time buyers – this all costs £18bn.

The Conservatives said this would be paid for by clamping down on tax evasion, to raise £6bn, and reforms to the welfare regime, to save £12bn.

But that’s about it in terms of details, which is a concern.

Experts think it might be possible to raise £6bn from tax evasion, but it would require some genuinely detailed proposals and likely a bit more funding. These details were missing.

Voters can also be legitimately sceptical of why a party that’s been in government for 14 years will now, at last, be able to get an extra £6bn out of people who should have been paying tax all along.

Turning to welfare, it makes sense to try and do something about the rising costs of long-term sickness. Spending on health related benefits is expected to increase to £63.7bn by 2029, up from £35.6bn in 2020.

However, many of the measures included in the manifesto have already been announced and are already included in the OBR’s forecasts. This means the additional £12bn in savings comes from a promise to reform the main disability benefit, on which there were almost no further details.

“The policies announced to deliver this further £12bn cut are not remotely up to the challenge,” Tom Waters, associate director at the Institute for Fiscal Studies (IFS) said.

On top of this, the Conservatives said nothing about the deep spending cuts implied for unprotected government departments after the election, which amount to around £19bn.

The Liberal Democrats

Given Ed Davey is the only person who has even attempted to make this election campaign remotely enjoyable, it feels harsh to suggest that his spending promises might not be all their cracked up to be.

But oh well.

The Liberal Democrats opted for some big spending packages in their manifesto, pledging to put an extra £27bn into day-to-day public spending.

This was largely targeted at health, education and defence, meaning those unprotected departments – courts, local government and prisons – would still be facing billions in cuts.

To pay for this big increase in spending, the Lib Dems outlined a range of revenue raisers, many of which are targeted at the rich and big corporations rather than ‘ordinary working people’.

The Lib Dems announced plans to double capital gains tax for top earners, from 24 per cent to 45 per cent, to help fund its NHS plans. On top of this, the centrist party would increase the Bank Surcharge and the Digital Services Tax as well as introduce a four per cent share buyback tax.

Experts warned that these taxes would likely still be felt by consumers. “Many of these tax rises are intended to look ‘victimless’,” Paul Johnson, director of the IFS said. “But of course they are not. We are already raising more from taxing companies than at any time in decades.”

The think tank warned that there were real dangers that the Lib Dems would not be able to raise as much cash from its proposed tax increases.

In particular, the IFS took aim at the buyback tax arguing there was “no economic rationale” for a tax that would likely distort companies’ financing decisions.

Dan Niedle, the head of non-profit organisation Tax Policy Associates, said a buyback tax could end up raising nothing because it would make buybacks uneconomic.

Reform and the Greens

Who’s left?

The Greens have pledged a series of big tax rises to fund spending plans which would see the size of the state increase to unprecedented levels.

Over the course of the next parliament they want to increase taxes by over £170bn per year to fund a £160bn boost to day-to-day spending. They also want to throw an extra £90bn a year at capital spending, which would be a particularly big increase.

Among the most eye-catching measures in the manifesto, the Greens pledged to introduce a wealth tax, which would be levied at one per cent a year on the assets of people with more than £10m and two per cent on those with more than £1bn.

Dan Niedle was dubious. “There has never been a tax like this anywhere in the world, raising so much money from such a small number of people. The Green Party provide no calculations, no references, and no explanations of how this tax would work.”

Beyond that, capital gains tax would be moved in line with income tax while higher rate taxpayers would see National Insurance increased to eight per cent. The Greens would also introduce a carbon tax, which would raise £80bn by the end of the parliament.

Helen Miller, deputy director of the IFS, was sceptical. “It is unlikely that the specific tax raising measures they propose to help achieve all this would raise the sorts of sums they claim – and certainly not without real economic cost”.

Turning to Reform. Richard Tice, the party chair, announced plans to raise the personal allowance threshold to £20,000 from its current level of £12,570. This would cost around £40bn, Tice said, and remove 7m people from the tax system.

The tax cut would be largely funded by preventing the Bank of England from paying interest on the deposits commercial banks hold at the Bank after quantitative easing. Tice described the current arrangement as a “voluntary decision to rip off the taxpayer and enrich City institutions”.

This would be a major change to the operation of monetary policy and would be unlikely to raise anywhere near the sums Tice hopes it would.