Riches or ruin?
The choice over Britain’s economic future could not be starker, says City Editor ALEX BRUMMER
THE Tory manifesto signalled an end to Britain’s age of austerity with pots of money for the NHS and the nation’s infrastructure, as well as modest tax cuts.
By the standards of recent budgets, when successive chancellors have struggled to keep the public finances on a tight rein, Boris Johnson and Sajid Javid are off to the races.
But in stark contrast to Jeremy Corbyn’s tax-and-spend extravaganza of £83bn, put forward in a Labour manifesto that would kill aspiration, enterprise and entrepreneurship, the Tory pledges are grounded in reality.
Indeed, the meticulous way in which the costings of the Johnson manifesto are presented give them the feel and look of the ‘Red Book’ – with independent figures from the Office for Budget Responsibility – which accompanies every budget. But then, this spending spree almost certainly is the budget we would have seen last month had the December election not been called.
Conservative pledges made since the General Election was called propose an extra £10.2bn of public spending between 2020-21 and 2023-24. This is in addition to the 4.1pc jump in spending by government departments, unveiled by the Chancellor, Javid (pictured left), in his September 2019 public spending review.
Admittedly, these pledges come nowhere near Labour’s eye-watering plans. But they do seem to add up.
In contrast, Corbyn & Co would splash out a staggering £28 for every extra pound which the Conservatives are planning to spend. If Labour were elected, the size of the state would swell from close to 38pc of total national output to more than 44pc – the biggest increase in peacetime history.
And that projection doesn’t even include the on-the-hoof decision over the weekend by Shadow Chancellor John McDonnell
(pictured right) to throw in an extra £58bn of spending, committing the party to restoring the pensions of women born in the 1950s who have lost out financially due to state pension age changes.
NO ONE disputes that the women were treated unfairly by a welfare system that is adjusting to people living longer. However, to simply announce that the Government will fully recompense them, without any indication of where the cash comes from, shows the true extent of Labour’s irresponsibility – and it could quickly leave the UK humiliated and queuing up for an International Monetary Fund bail-out alongside serial defaulters such as Argentina.
Rather than making such ludicrously grandiose promises, the Tory manifesto offers sensible pledges, such as £22bn of extra long-term investment (in addition to the £10.5bn in public spending) in the nation’s infrastructure.
This money would be used for projects ranging from mending potholes to boosting the network of electric vehicle charging points, better insulation for homes and improving inter-city travel links.
Most of this should be fully deliverable during the next Parliament without creating the vast, costly bureaucracies Labour proposes to execute its spending plans, or hitting the obvious constraints of skilled labour shortages. (The one project that won’t be completed soon is the HS2 link between London, Manchester and Leeds – along with a further high-speed link across the Pennines.)
But with all this spending, how can Britain afford the manifesto’s Thatcherite promise of a ‘triple lock’ to prevent VAT, National Insurance Contributions (NIC) and income tax – the three taxes which most impact on ordinary people – from being raised during the next Parliament?
The triple lock will be popular – and it puts blue water between Johnson and Corbyn, who plans to saddle all families earning more than £80,000 a year with burdensome taxes which would send many of the nation’s strivers and wealth creators overseas.
But it has to be paid. And business will be disappointed that Johnson and Javid have chosen to fund it by doing away with previously pledged cuts in corporation tax.
The reduction of taxes on UK companies over recent years has enabled us to compete with the likes of Ireland and Singapore for overseas investment. But now, UK firms face additional taxes of £23.5bn in the next four years.
Yet Labour’s plans for corporation tax are infinitely worse. The FT last week said the Labour manifesto would create the world’s ‘harshest tax regime on business income among large advanced economies’.
WHILE Labour would frighten financial markets to death, destroy Britain’s credit rating and lead the whole nation over an economic precipice, the Conservatives seek to provide a fiscal stimulus that should boost output but not at the cost of destroying carefully built growth and stability.
Mark Carney, governor of the Bank of England, and the business leaders I engage with every day believe that if the UK seals a Brexit deal, as the Tories hope, pent-up investment by UK businesses will be unleashed.
Growth will pick up from its suboctane levels, jobs will be created and recent real-term wage increases will be boosted further.
The slowdown in the economy will be reversed and Britain will be in a position to lead the rest of the world out of stagnation.
The fact is, this Tory manifesto lays the groundwork for a restoration of much-needed business and consumer confidence.