November 14, 2019 by Paul Goldsmith
The Conservative Party’s assessment of Labour’s spending plans betray a massive lack of confidence in themselves. They are full of false assumptions and deserve to be called ‘fake news’. They shouldn’t have to lie to make their point. It says a lot that they are doing so.
The website http://www.costofcorbyn.com has all the usual tricks from the classic Conservative Party playbook. Corbyn is pictured looking stern with a proper red background (the red being more stark than actual Labour Party red, because the aim is to remind you of his Marxism). The headline says Labour will spend an extra £1.2trillion over the next five years, increasing Government spending by 30%. They then point out this is £650m extra a day and add that this is the NHS’s budget for 9 years. They then mention the things that could be paid for with the money that ‘Corbyn’s spending splurge’ is committing, relating all those things to hospitals, schools and the police. There are some PDF documents with some official looking accounting and sourcing. But the veneer of credibility hides an astonishing insecurity within the Conservative Party. So much of it is based on lies and false assumptions.
The key amounts include a £600bn value of spending promises in Labour’s 2017 manifesto. Then £385bn of extra day-to-day spending on welfare, schools, health and the police. £201bn is to be spent on capital spending on infrastructure like road and rail. £196bn will be spent on Labour’s nationalisation proposals, moving to a 32 hour working week will cost £85bn, a universal basic income pilot £4.5bn, free bus travel for the under 25s £7bn, and home insulation and refurbishment will cost £30bn.
They got to £1.2trillion by taking the additional cost of Labour’s spending over five years, instead of one year, just to make sure the figures got into the trillions. It is basically an additional £250bn a year extra on top of the current £840bn the Government already spends.
Ugh, where do I start?
- Taking as a starting point £840bn a year spending ignores the fact that the OBR estimated that spending could get over £950bn a year by the early 2020s, and that’s before mentioning the spending proposals Boris Johnson has made since becoming PM – so it ignores the fact that the Tories will ALSO raise spending. The Resolution Foundation argue it would do so enough to raise spending back to 1970s levels, and the National Institute of Economic and Social Research, an independent think tank, says that Boris’s Brexit deal could cost the UK economy over £70bn over the next 10 years.
2. The Shadow Chancellor John McDonnell argued in 2017 that the manifesto plans were fully costed, paid for by tax increases, and would amount to £600bn a year, not £240bn. The Tories don’t account for that difference.
3. The Tories use a figure of £85bn for the cost of a 32 hour working week as if that would be instituted the day after Labour win the election, despite McDonnell saying the proposal would happen within a decade. They also get the figure from the Centre for Policy Studies thinktank – which is, you guessed it, a right wing thinktank. The CPS decided, for reasons that defeat me, to ignore the uplift in productivity the policy should bring.
4. Let’s turn to the cost of nationalisation at £196bn. This came from an analysis released by the Confederation of British Industry, which is, of course, completely disinterested in this policy. But let’s just say that if the National Union of Turkeys valued Christmas I wouldn’t quite take that figure at face values. Of course, the Conservatives have done exactly that – which is why it includes the purchase of rail rolling stock. This the CBI even eventually were forced to admit wasn’t in Labour’s plan and had massively inflated its predicted figure. What’s more, the CBI decided that it wasn’t worth including the outcome of the state taking control of profit-generating assets (so they would get money back), which Labour claim would mean the policy could pay for itself over time. Strange!
5. Much harder to value, and not the Conservatives’ job to do, is the benefits for wellbeing that Labour spending might bring. Years of austerity has stripped back public services far from where they should be, and the benefits for instance of the policy announced this week by Labour of free job-switching education for adults will make a massive difference in the future.
The cost of borrowing is at historic lows, which is why the Tories are committing to borrowing and spending a lot without raising taxes. Well placed higher spending is capable of raising the productive capacity of the economy, which in turn can help it grow faster and increase tax revenue.
So, all in all, take the Tories figure with a fistful of salt, let alone a pinch