11 May 2017

Labour’s manifesto takes the voters for fools


“We know the importance of managing public finances,” reads the draft of the Labour manifesto that was leaked to the press last night. “So our manifesto is fully costed, with all current spending paid for out of taxation or redirected revenue streams. This means Labour will eliminate the current budget deficit within five years.”

On social media, Labour supporters are delirious. A proper Labour manifesto! For the many not the few! And it’s all fully costed!

The problem is, as Alex Wild pointed out on CapX earlier this week, saying something is “fully costed” doesn’t mean it actually is. I’ve spent the morning going through the full text of the thing, and I can’t for the life of me see how the numbers add up – even with Diane Abbott doing the maths.

In terms of the big picture, Labour is promising to eliminate the deficit within five years, and “leave debt as a proportion of trend GDP lower at the end of each Parliament than at the start”. So far, so George Osborne. It will also “take advantage of near-record low interest rates to invest £250 billion over 10 years in upgrading our economy to ensure that our transport, energy and digital infrastructure is fit for the 21st century”.

To make the numbers work, this £250 billion will be accounted for separately from day-to-day expenditure – although there’s no mention of the additional borrowing costs that will have to be factored in.

But even then, the figures are a nonsense.

Labour’s manifesto is packed with spending promises. These fall into three categories.

The first are the plans that come with an equivalent tax rise: “We will take from wicked bankers/Tories to do this particular nice thing.”

To be specific, Labour will “establish a Migrant Impact Fund for public services under additional pressure in host communities, funded by the existing visa levy and an additional, proportionate contributory element from residence visas for high net worth individuals”. It will also introduce free school meals for all primary school children, paid for by removing the VAT exemption from private school fees.

And that’s it. Those two paragraphs are the only specifically costed promises in the whole thing (beyond the big corporation tax and sock-the-rich stuff, which we’ll get to later).

Next, there are the outright spending pledges. Some of these may or may not come out of the £250 billion infrastructure pot. But there are still an awful lot that won’t. (Feel free to scroll down if your eyes glaze over.)

Establish a National Investment Bank financed with an injection of initial public capital

Provide targeted government support to UK supply chains

Spend more on research and development

Create regional development banks to support local businesses and regional industrial strategies

Reinstate the small business corporation tax rate.

Link business rates to (lower) CPI rather than RPI measure of inflation

Exempt new investment in plants and machinery from business rates

Nationalise the electricity distribution and transmission grid

Set up at least one publicly owned energy company in every region of the UK

Guarantee to cover any shortfall in EU Structural Funding that occurs as a result of Brexit

Make significant capital investment in childcare to ensure that places exist to meet demand

Extend the 30 free hours to all two-year-olds and potentially some one-year-olds

Phase in subsidised provision on top of free hour entitlements to make sure everyone has access to affordable childcare

Reverse the Tories’ cuts to education budgets (start date unspecified)

Give transitional relief to schools set to lose out under new funding formula

Reduce class sizes for children aged five to seven to under 30, and other children “as resources allow”

End the public sector pay cap

Reintroduce national pay bargaining

Extend schools-based counselling to all schools to improve children’s mental health

Abolish loans and fees for further education courses

Restore the Education Maintenance Allowance for 16-18 year olds from lower- and middle-income backgrounds

Increase capital investment in further education

Reverse cuts to Union Learn

Abolish university tuition fees

Reintroduce maintenance grants for university students

Introduce four new national public holidays

Raise the minimum wage to the level of the living wage

Abolish employment tribunal fees

Double paid paternity leave and increase paternity pay

Impose higher standards on companies bidding for public contracts (which will therefore drive up prices)

Compensate women born in the 1950s for having their state pension age increased

Scrap the rise to the pension age due by the end of 2020

Scrap the sanctions regime for those on benefits

Scrap the bedroom tax

Scrap cuts in bereavement support payments

Reinstate housing benefit for under-21s

Review the cuts to Universal Credit work allowances, and the decision to limit tax credits to the first two children in a family

Increase the Employment Support Allowance by £30 a week

Uprate carers’ allowance to the level of Jobseekers’ Allowance

Invest to built a million new homes

Guarantee Help to Buy funding for first-time buyers until 2027

Make 4,000 additional homes available for people with a history of rough sleeping

Invest £250 million in a new Children’s Health Fund

Increase health visitor and school nurse numbers

Commit to over £6 billion extra in annual NHS funding

Separately, boost capital funding for the NHS

Reverse the “privatisation” of the NHS and repeal the Health & Social Care Act

Provide an extra £8 billion over the Parliament for social care

Recruit 10,000 more police officers

Recruit 1,000 more border guards

Hire 3,000 more prison officers

Re-establish Legal Aid entitlement in the family courts, and for judicial review

Fund child burial fees for bereaved parents

Buy back the Royal Mail

Set up a Post Office bank

Invest in rural broadband, housing and transport

Spend more on flood management and coastal protection

Nationalise the railways

Once nationalised, freeze fares, introduce free wi-fi across the network, guarantee “safe staffing levels”, end driver-only operation and improve accessibility for the disabled

Build “Crossrail of the North”

Complete the “Science Vale transport arc” from Oxford to Cambridge through Milton Keynes

Build Crossrail 2

Set up municipal bus companies

Establish £1 billion Cultural Capital Fund to upgrade our existing cultural and creative infrastructure

Introduce an arts pupil premium to every primary school in England worth £160 million per year

Give the Equality and Human Rights Commission the appropriate funding to carry out its functions

Move towards a minimum target of government spending on diplomacy and conflict resolution

Improve pay and living conditions for the Armed Forces

Insulate the homes of disabled veterans for free

Invest in research to fight tropical diseases and improve public health in the developing world

I should stress here that not all of these are bad ideas. It’s hard to argue against insulating the homes of veterans, or paying for the funerals of dead children, or fighting malaria. But you have to admit that all of these spending pledges stack up, and up, and up.

And then there’s the third category of spending pledges – the ones that don’t look like spending pledges at all.

Some of these are guarantees that things will continue as they are, or that they will keep to Tory spending commitments. The triple lock on the state pension will be kept, as will free bus passes and winter fuel allowance for every pensioner, no matter how wealthy. The pensions of UK citizens living overseas will be protected.

In terms of existing spending, Labour will also commit to developing Trident, meeting the aid target, spending at least two per cent of GDP on defence (how that and Trident must have burned in Corbyn’s soul) and building the HS2 rail line.

Many of these are already costed into the Government’s budget – but all are also potential savings that could have provided the cash to pay for the rest of it.

Finally, there are the pledges not to impose particular, evil Tory cuts. Considering Labour’s anti-austerity rhetoric, these are more limited than you’d think. But they are, in order:

Scrap the plan for schools to pay the apprenticeship levy, at a cost of £150 million (technically a case of taking from one part of government and giving to another)

End the cuts to youth services

Protect Sure Start and ensure that no more centres close

End cuts to local authority budgets to support the provision of libraries, museums and galleries

Ensure libraries are “preserved for future generations and updated with wi-fi and computers”

End the closure of Crown Post Office branches

Halt the cuts to fire and rescue services

Halt the NHS “Sustainability and Transformation Plans” and ask local health groups to redraw them “with a focus on patient need rather than available finances”

The problem is that most of those cuts are being made because the Government needs to cut the deficit, an aim Labour claims to share. So if it isn’t going to make them, it needs to explain how it’s going to raise the money elsewhere.

Which brings us, at long, long last, to how Labour’s going to raise the money. And on this, the manifesto has a lot less to say. Practically nothing, in fact.

The most obvious route is tax rises. But Labour “will guarantee to rule out rises in income tax for those earning below £80,000 a year, on personal National Insurance Contributions, and on VAT”. They insist that “only the highest 5 per cent of earners will be asked to contribute more in tax to help fund our public services that have suffered at the hands of seven years of Tory austerity”.

Fine. Great. Let’s assume that the rich – who are already contributing a gargantuan proportion of the tax take – will be entirely happy about this. That’s a few billion in the pot.

Except that the manifesto explicitly states that the resulting £6 billion a year plus will go to the NHS. Even then, it won’t be enough, so they’ll also fund it by raising taxes on private medical insurance and halving the fees paid to management consultants.

Next, there’s Labour’s plan to “ask large corporations to pay a little more”. The idea is to reverse Conservative cuts to corporation tax, thereby raising £20 billion. Except that as Daniel Mahoney of the Centre for Policy Studies calculated recently, Labour’s plan would only raise between £3.7 billion and £5 billion per year, because of the way higher taxes depress revenues.

The problem for Labour here isn’t just that lower corporation taxes have actually increased revenues, as this chart shows.

It’s that if you look at the corporation tax take over the last 20 years, there is no precedent for squeezing an extra £20 billion out of companies.

Even the Institute for Fiscal Studies, which is more generous to the Labour plan, says that the “back of an envelope” figure of £19 billion cannot and will not be reached, and points out that it would not only result in lower pay for workers as the cost is passed on, but substantially increase a tax burden that is already at its highest as a share of national income for 30 years.

Still, let’s be generous and say that Labour does magic up something close to that £20 billion figure. The problem is that it promises that “extra corporate tax revenues will contribute to education and skills budgets” – which, we’ve been told, includes £9 billion for education. This despite the fact that the tuition fees promise alone will cost £10 billion – according to Jeremy Corbyn’s own numbers.

So where is the rest of the money going to come from? Even with that £250 billion in infrastructure spending to play with, how in the name of all that’s holy can Jeremy Corbyn list all the spending pledges above and then say with a straight face that it’s all affordable – and, on top of that, that he can eliminate the deficit as well? Or are the remnants of the £20 billion corporation tax hike – which won’t and never can raise £20 billion – going to pay for it all?

The answer, obviously, is that Corbyn and John McDonnell can’t make the numbers add up. They’re not even pretending to. They’re just saying the words “fully costed” and hoping everyone nods like it explains everything – or keeps repeating that this is only a leaked draft, so of course the figures aren’t there.

So let me be clear. Whatever “costings” are eventually applied, there is not even the fragment of a possibility of these numbers adding up.

On one level, this doesn’t matter terribly much, because there’s no way they and their bunch will actually get into government. But it’s still up to the rest of us to ensure that politicians tell us how they’re going to pay for their promises – and give them the strongest possible thumping when they so obviously try to play us for fools.

Robert Colvile is Editor of CapX and author of 'The Great Acceleration: How the World is Getting Faster, Faster' (Bloomsbury)