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The UK’s two main parties have set out plans to improve public services that are “essentially unfunded”, the Institute for Fiscal Studies said on Monday.
In a scathing verdict on the Labour and Conservative manifestos, the think-tank said the parties had “hidden and ducked” the hard economic choices ahead, despite claiming their tax and public spending plans were “fully costed”.
“Regardless of who takes office . . . they will — unless they get lucky — soon face a stark choice,” said Paul Johnson, IFS director. “Raise taxes by more than they have told us in their manifesto. Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer.”
“On 4 July, we will be voting in a knowledge vacuum,” he added.
The damning account of the economic dilemma facing both parties comes as the election campaign enters its final stretch. Labour is widely expected to win next week, while the Tory party’s struggling campaign has been dealt a further blow by a spiralling betting scandal.
The IFS said both parties had pledged debt would be falling in five years’ time, while also entering a “tax lock arms race”, competing with each other to rule out many of the ways in which they might raise extra revenue.
“These tax locks are a mistake,” Johnson said. “They will constrain policy if a future government decides that it does in fact want to raise more money to fund public services. They also put serious constraints on tax reform.”
Helen Miller, IFS deputy director, said that if a Labour government wanted to raise “big money” in the areas where it had not yet ruled out changes, it would need to make politically difficult reforms to capital gains tax, which could discourage investment.
A Labour spokesperson said: “While we’re under no illusions about the scale of the challenge we’d inherit if elected, we don’t accept that the economy can’t be better than it is now under the Tories.”
They added that the party’s manifesto was “a fully funded plan to change the country and offer economic stability”.
Labour’s campaign has focused heavily on its plan to bolster the public finances through reforms to raise economic growth, a claim the IFS called into question.
The body estimated the government could avoid £30bn of spending cuts if the Office for Budget Responsibility upgraded its forecast for UK GDP growth by 0.5 percentage points.
However, it added the OBR’s forecast was already more optimistic than most, and luck could just as easily turn against the new government.
“Good policymaking can boost growth but it certainly can’t do it quickly,” said Carl Emmerson, IFS deputy director.
The IFS described Labour’s manifesto commitments to new public service spending — for example, on teacher recruitment and school breakfast clubs — as “trivial”.
But it added that the party’s biggest pledge, to boost green investment by £5bn a year, would still leave public sector net investment falling.
The IFS said both parties promised to cut NHS waiting times, deliver an ambitious expansion of the NHS workforce and build more hospitals, as well as tackling crime, without allocating new money.
“These ‘fully costed’ manifestos appear to imply all this can be delivered for free. It can’t,” Johnson said.
Implementing the NHS workforce plan could require extra funding equivalent to 3.6 per cent of national income per year. Both parties also aspire to increase defence spending and have promised to maintain schools spending in real terms, while funding new childcare entitlements.
This implies steep cuts to unprotected areas of spending, such as courts, prisons and local government — equivalent to £9bn a year by 2028 under Labour’s plans and £18bn a year under Conservative plans, the IFS said.
The IFS also criticised pledges by Reform UK and the Green party, saying they had made “unattainable” claims on tax and were helping to “poison the entire political debate”.
