Last week’s release of the analysis of Labour spending pledges prompted the party to publish its own document in response. This new document inevitably contains a number of errors. In particular, it repeatedly confuses “millions” for “billions” in its costings on page 14.
Here are a few other examples:
Page 1: “The independent Institute for Fiscal Studies has said Labour has the most cautious approach of all the parties and has promised no net giveaways. Labour has made no unfunded spending or tax commitments.”
Firstly, as the IFS has pointed out today, the general plans which Labour has outlined imply up to £50 billion more borrowing a year by 2020 than under the Conservative plans; hardly a paragon of fiscal prudence. Secondly, as the IFS also made clear, its own analysis looks at rather a different set of policies than the Conservative document.
Page 3: “They have, for example, provided a cost for our GP access guarantee in 2015/16 despite no commitment from us on introducing it within that year, while they have taken no account of our funding of additional GPs from a Mansion Tax.”
Labour argues here that some of their spending pledges in 2015/16 will be covered by the revenue from the Mansion Tax in the same year. In my paper looking at the employment effects of the party’s tax policies, I assumed as Labour does that the tax would be immediately enforced. In practice, even if such a tax was feasible, the revenue would take a lot longer to come in and would be unlikely to generate smooth, regular receipts. Essentially, Balls is claiming that it would be possible to pass this new type of tax into law, establish and implement a mechanism for valuations, work out what to do with the appeals process etc all in just a few months. Quite unlikely.
Page 4: “they say that a commitment to "take steps to promote cycling by making it safer and more accessible" amounts to a specific £63 million spending commitment to cancel the abolition of Cycling England Towns and Cities initiatives - this is just nonsense.”
This criticism seems quite odd given Michael Dugher’s speech at the end of November. Firstly, he states that Cycling England and the Cycling Towns and Cities initiative were very effective at promoting cycling. Secondly, the Government abolished them. Thirdly, Labour condemns the Government for abolishing them. Fourthly, an incoming Labour administration would promote cycling more effectively than the current Government.
Far from being “nonsense”, this is as close as you can get to being an actually explicit spending commitment especially given the sheer number of times that Labour figures have criticised the abolition of Cycling England. Such heavy criticism of a particular spending cut must imply that Labour would reverse it. If it doesn’t and we are simply to assume that Labour shadow ministers are merely talking to themselves, then there is not much reason to listen to anything the shadow ministers say.
Page 5: “In looking at costs for additional contributory jobseeker’s allowance civil servants have been told to assume ‘that claimants would be eligible for the higher rate of JSA ( C) for six months, although not all claims last that long’. This is a ridiculous assumption to make, and ignores the fact that Labour have committed to introducing a higher contributory rate of JSA on a cost-neutral basis.”
Unfortunately, Labour has twisted and turned on this policy for a while. Chris Leslie for example argued that the party was “not proposing to change the time periods for which people are able to be on those particular allowances”. This reflects either a lack of discipline in the party’s messaging or a lack of understanding of its own policy.
More broadly, even if the “cost-neutral” element was included in the party’s press release, it would still be in itself insufficient. If a party makes £50 billion of spending commitments but then says we shouldn’t worry because it will be cost-neutral, we should simply not be satisfied. Unless they say clearly that they will pay for it by cutting elsewhere or by raising taxes, then the spending commitment is unfunded.
Page 6: Criticism of the assumption that “that tax changes will only come into force later in the Parliament, such as the restriction to pension tax relief for top earners.”
Even if the tax relief proposal is introduced immediately after the election in May 2015 it would not come into force until the tax year 2017-18. This two year delay is to give people who would be affected by it along with the industry and HMRC etc time to be consulted on and adjust to the new system. This assumption is in line with a previous consultation on a similar policy, which was published in December 2009.
Page 7: “The Treasury has said that the combined cost of these policies, if introduced at the end of the Parliament, is £7.2 billion… The Tories have yet to say how they will pay for these tax Policies”
It is rather easier to cut taxes when a government is not running a deficit. The Conservative plans imply a £23 billion surplus by 2019/20 which would more than cover the estimated £7.2 billion reduction in revenue implied by the tax plans outlined at the Conservative Party Conference. Clearly, there is no timetable yet on the proposed tax cuts but such plans are certainly more credible in the context of an intended surplus and having already demonstrated the ability to make spending cuts. Also, as Fraser Nelson points out, uprating the higher rate threshold was the standard practice for Labour when it was in power.
Page 8: “In the 2014 Autumn Statement, George Osborne claimed to be spending an additional £1.2 billion on the NHS. But this is not new money – it was allocated from the Government’s Reserve.”
As page 148 of the Economic and Fiscal Outlook makes clear, the extra £1.2 billion spending on the NHS in 2015/16 is taken from expected departmental underspends. This is money that will not otherwise have been spent on the NHS. It is most certainly new money.