The Conservative party manifesto is promising fresh tax cuts if the Tories win the general election as Rishi Sunak seeks to eat into Labour’s massive opinion lead. Keir Starmer said the Conservative plans were reminiscent of Jeremy Corbyn’s 2019 manifesto.
What are the Conservatives saying on tax?
The Conservatives have made five big tax pledges: to cut employee national insurance (NI) from 8% to 6%; to abolish NI for the self-employed; to guarantee that the state pension remains below the threshold for paying income tax; to raise the threshold at which families pay the child benefit tax charge from £60,000 to £120,000; and scrap stamp duty for first-time buyers on homes up to £425,000. Total cost: £17.2bn, of which the 2p cut in employees’ NI accounts for more than half. The biggest gainers will be the top 20% of earners, who would be £1,300 better off on average. The poorest fifth would gain an average of £150.
Any other pledges?
Yes, the Tories are planning to increase defence spending to 2.5% of national income by 2030 (costing £5.7bn) and have a host of smaller spending commitments, such as the introduction of national service for young people (£1bn), 100,000 apprenticeships (£900m) and 8,000 new police officers (£800m).
And how do they intend to pay for all this?
The £17bn of tax cuts will be paid for in two ways: by cutting the welfare bill by £12bn a year and cracking down on tax avoidance and evasion (£6bn). The other spending pledges will be met by a range of measures including reducing the number of civil servants (£4bn); reducing the bill for management consultants (£640m); having fewer NHS managers (£550m) and axing “low-value” degrees (£900m).
Do the sums add up?
Only if you believe a future Conservative government can actually find the savings it has identified. Paul Johnson, the director of the Institute for Fiscal Studies, has his doubts. He says the tax cuts are definite commitments being paid for “by uncertain, unspecific and apparently victimless savings”. Mike Brewer, interim chief executive of the Resolution Foundation, said the lack of detail meant the tax plans struggled to pass the plausibility test.
So is this just magical thinking and fantasy arithmetic?
Not entirely. The Conservatives say they have raised almost £100bn through tax-avoidance measures since 2010 (£6.7bn a year on average). What’s more, the 2015 Tory manifesto pledged to cut welfare spending by £12bn – a pledge that was eventually met. The 2024 manifesto says there will be a two-pronged approach to cutting the welfare bill: better targeted disability benefits and tightening up how the system assesses ability to work. Paul Carberry, chief executive of the charity Action for Children, said the welfare reforms looked set to “hugely impact disabled people and those with mental health conditions who face barriers to work, causing yet more needless hardship for families with children”.
Aren’t the Conservatives forgetting to mention the tax increases already in the pipeline?
Yes, they are. A six-year freeze on tax allowances and thresholds has another three years to run. The precise sum raised by these stealth measures is not known for certain, because it will depend on the number of people working and the rate of inflation, but it will probably be more than £17bn. The Resolution Foundation said the net tax take would still be just over £5bn higher by the end of the next parliament and the tax to national income ratio would be the highest since 1948.
Any other glaring omissions?
Most certainly. Conservative plans are based on a 1% real-terms increase in public spending after the election. But commitments to ringfence budgets for health, defence, overseas aid and children imply deep cuts of up to £20bn for unprotected departments such as the Home Office and the Ministry of Justice. Keeping to these plans would involve a new era of austerity.