Labour’s spending plans would mean an additional £2,400 bill for every taxpayer in Britain, the Conservatives have argued. Labelling the figure as the “cost of Corbyn”, the assessment comes after the Tories said Labour would spend an extra £1.2tn over the course of the next parliament.
The Tories said Labour’s policies announced so far implied additional spending of £651bn over five years that was not currently accounted for by government income from taxes, and that taxes would need to rise to cover the cost.
It said Labour had already committed to raising £277bn in revenue, leaving £374bn currently unfunded. Dividing that sum between 31.2 million taxpayers in Britain, it means £12,000 each over five years, or £2,400 a year.
The £2,400 sum assumes all taxpayers pay tax equally, which is not the reality of the tax system. According to government figures, the top half of taxpayers were liable to pay 90% of total income from taxes in 2016-17.
Labour has said day-to-day government spending – the amount allocated for public services, excluding long-term infrastructure investment – will be balanced with tax income. The Conservatives have committed to the same rule.
Labour’s rules exclude borrowing for long-term investment. The Tories plan to cap borrowing for this kind of spending at 3% of national income.
In March, the Office for Budget Responsibility (OBR) said there was a current budget surplus of £37bn in 2022-23, suggesting plenty of room for spending increases or tax cuts. This does not appear to have been included in the Tory estimate.
Rishi Sunak, the chief secretary to the Treasury, said on the BBC Today programme that the Conservative party would raise day-to-day spending within the “headroom” forecast by the OBR and not raise taxes.
The Tory costing is not based on a Labour manifesto, which has yet to be published. Without it, it is practically impossible to accurately assess Labour’s plan. The Tories are also yet to publish a fully costed manifesto.
While there may appear to be billions of pounds of headroom in the day-to-day budget, the Institute for Fiscal Studies warns this is an illusion.
The country’s leading tax and spending thinktank said the public finances had markedly weakened since the March OBR forecast, meaning that the headroom had already in effect vanished. The OBR forecast took inadequate account of existing planned spending rises, changes to the accounting of student loans, and the British economy slowing to a crawl.
The prime minister’s Brexit plan – which could have a major impact on the UK economy and public finances – is also missing. The OBR had planned an update alongside the autumn budget, but it was scrapped as the Tories pushed for the December election instead.
For both parties, adhering to their rules will leave little room for big increases in day-to-day spending – unless they raise more in tax or allow borrowing to rise. Both have also yet to publish manifestos, making it practically impossible to accurately assess their plans at this stage.