Neither of Britain’s main political parties is being upfront about their budget plans, according to the Institute for Fiscal Studies.
Prime Minister Theresa May’s Conservative Party, which has pledged to erase the budget deficit by 2025, is unlikely to achieve that goal without upping taxation or damaging the public services, the London-based research group said in a report published Friday.
And while the Labour Party’s proposal to increase spending is reasonable by international standards, it can’t be funded by increasing taxation solely at the very top, as envisaged by leader Jeremy Corbyn, the IFS said in an analysis of the parties’ manifesto pledges ahead of the June 8 general election.
Neither party “is being really honest with the public,” said IFS Director Paul Johnson. “It is likely that the Conservatives would either have to resort to tax or borrowing increases to bail out public services under increasing pressure, or would risk presiding over a decline in the quality of some of those services,” including the National Health Service, he said.
Labour, the IFS said, is proposing to increase spending to its highest sustained level in more than 30 years and taxes to their highest ever peacetime level. That would be in line with Canadian rather than Scandinavian levels. But its policies would raise far less than the 49 billion pounds ($63 billion) claimed, meaning the tax burden would end up being spread more widely than planned.
“A bigger state than the one we have been used to is perfectly feasible,” but “Labour should not pretend that such a step-change could be funded entirely by a small minority at the very top,” Johnson said.
Labour would run a deficit of around 37 billion pounds larger than the Conservatives in 2021-22, the final year of the next parliamentary term, according to the report.
The Conservatives’ aim of overall budget balance by the mid-2020s may require an additional parliament of austerity, the IFS said, since on current plans the deficit could still be around 1 percent of national income by 2021-22.
“The big risk is that, after seven years of austerity, they would not be able to deliver the promised spending cuts either at all or at least without serious damage to the quality of public services,” the report said.
The goal of reducing immigration would cause “considerable” economic damage, the IFS said. That’s particularly a concern given Britain’s aging population, which will push up spending pressures on health, pensions and social care over the coming decades, it said.