IFS: Labour sums don’t add up ... and will cost you £750

TOP economists have given a scathing verdict on Labour’s manifesto, warning it ‘absolutely doesn’t add up’ and would cost the average household £750 a year.

The Institute for Fiscal Studies said basic errors in the party’s programme for government meant it simply could not raise the huge sums it claimed.

Director Paul Johnson said that, despite the party’s promises that only big business and the rich would face higher taxes, its plans would ‘hit individual taxpayers pretty hard’.

An IFS analysis of Labour’s tax and benefit plans indicates a typical family would be £750 a year worse off under a Jeremy Corbyn administration – more than £60 a month.

The burden would fall most on the wealthiest 10 per cent of households – those with a post-tax income of £56,000 or more – who will lose an average of £2,700 a year.

Most of the losses would fall upon those earning £80,000 or more, as they would be hit with higher income tax if Mr Corbyn enters No 10.

The IFS analysis takes into account changes only in personal taxation and benefits – and not Labour’s hikes in corporation tax, the costs of which will eventually fall on ordinary families.

Yesterday Mr Johnson told BBC Radio 4’s Today programme that the manifesto did not add up because it proposed spending an extra £75billion a year. Labour has proposed to raise £25billion of this from borrowing, and the rest from higher taxes.

‘They’re saying, “we’re going to raise taxes only from companies and the very rich”,’ Mr Johnson said. ‘If they were able to do that, that would take tax in the UK to its highest ever level in peacetime … But actually they can’t raise the £50billion … you can’t raise that amount of money just by taxing companies and a little bit off the rich.’

Asked whether that meant the manifesto did not add up, he said: ‘It absolutely doesn’t add up. Partly there are just some errors in their numbers … Some of the particular avoidance schemes and so on that they’re talking about, you just can’t make work.

‘The big numbers … there’s £20billion from an increase in corporation tax rate, there’s some unspecified more billions from changing corporate tax … in the short run you might get £30billion or £40billion and that is quite a lot.

‘But in the long run, again you would probably be reducing investment. Actually what they’re talking about from the “rich” would hit individual taxpayers pretty hard.’

Shadow chancellor John McDonnell insisted Labour would raise large amounts on overseas property tax and by putting up corporation tax.

‘The IFS aren’t infallible,’ he told BBC Radio 4’s The World at One. ‘They did get it wrong with the economic crisis.

‘They did get it wrong with closing the deficit by 2015. They got it wrong last year on business investment. And I think they’ve got it wrong this time as well.’

The IFS analysis, drawn up last month, looked at the effects of the parties’ proposals for personal taxes and benefits on each ‘decile’, from the 10 per cent poorest to the 10 per cent richest.

Across all incomes, all parties’ proposals would lead to a decline in average income, whether due to tax rises or benefit cuts. The fall would be £750 under Labour and £550 under the Tories.

Last night David Gauke, Chief Secretary to the Treasury, said: ‘Jeremy Corbyn is planning the biggest tax hikes the country will have ever seen which would put jobs at risk, the economy at risk and family finances at risk.’