Labour tax rate ‘would be highest seen in peacetime’

JEREMY CORBYN’S manifesto pledges would increase spending to levels not seen since the Eighties and raise taxes to their “highest ever peacetime level”, an influential think tank warned yesterday.

An analysis by the Institute for Fiscal Studies (IFS) concluded that the costings behind Labour’s generous giveaways “would not work” because it would be impossible to raise as much money as the party claims it could.

The IFS also said “there is no way” that Labour’s plans for tens of billions of pounds of tax rises would affect “only a small group at the top”, as the party has claimed.

Instead, its pledge to increase taxes on companies would lead to a reduction in the incomes of ordinary households through lower wages, higher prices, or lower investment returns.

It also warned that the Conservatives would probably have to resort to increasing tax or borrowing in order to “bail out” public services to prevent their decline during their proposed continuation of austerity measures.

The IFS carried out a detailed study of the Labour and Conservative manifestos, criticising both parties for failing to spell out the consequences of their proposals.

Carl Emmerson, deputy director of the IFS, said: “The shame of the two big parties’ manifestos is that neither sets out an honest set of choices.

“Neither addresses the long-term challenges we face.

“For Labour we can have pretty much everything – free higher education, free childcare, more spending on pay, health, infrastructure. And the pretence is [that] that can all be funded by faceless corporations and ‘the rich’.

“The Conservatives simply offer the cuts already promised... Compared to Labour they are offering a relatively smaller state and consequently lower taxes. With that offer comes unacknowledged risks to the quality of public services, and tough choices over spending.”

The IFS warned that Labour’s tax increases may “not raise anything like” the £48.6billion claimed.

The Conservatives’ aim to balance the budget by the mid-2020s would “likely require more spending cuts or tax rises even beyond the end of the next parliament”, the think tank said.

The Tories’ plans for NHS spending “may well be undeliverable”, and withdrawing the winter fuel allowance from wealthier pensioners and scrapping the triple lock on pension increases is “a nod towards dealing with the costs of ageing” but “would make a trivial difference to spending”.

The Conservative commitment to reduce levels of net migration to the “tens of thousands” risks damaging the economy, particularly when coupled with the ageing British population, the think tank added.

Responding to the analysis, John Mcdonnell, Labour’s shadow chancellor, said: “We believe the IFS has underestimated the revenue-raising effectiveness of some of the tax changes we would make.”

David Gauke, chief secretary to the Treasury, said: “To protect our economic security through Brexit and beyond there is only one choice at this election – Theresa May and her Conservative team.”