The Scotsman

Politician­s’ ghost Numbers may not be as scary as the real thing

◆ Such scaremonge­ring should not stop us talking about numbers – but they should be the real numbers which are already available

- Brian Monteith is a senior advisor to the Tax Reform Council

They are at it again. Politician­s with febrile imaginatio­ns cannot resist the temptation to make their numbers up in general election campaigns. Ghost Numbers are scary figures dreamt up and used by politician­s to strike fear into the public, warning of a calamity we will face, citing the ethereal figure as incontesta­ble evidence of their opponents’ devil-worshippin­g traits.

These Ghost Numbers are then roundly condemned by weather-worn sceptics or supported by superstiti­ous adherents.

When ordinary people reach out for these Ghost Numbers they disappear as they put their hands through them – only for them to come back again when another believer raises them from the dead. Politician­s of all parties tell Ghost Number stories, here’s three recent shockers.

Last week on a televised debate, the SNP Westminste­r leader, Stephen Flynn, stated Brexit had cost £40 billion in lost tax revenues, generating seal-like clapping from a studio audience waiting to swallow whole any old red herring thrown at them. It was a Ghost Number, as the truth is very different.

Since the EU referendum was held UK tax revenues have increased hugely in real terms, from £536.8bn in 2015/16 to £731.1bn in 2022/23, as taxes have been hiked. This was also higher than the revenues in 2019/20 when we entered the transition period and in 2020/21 when we finally left the EU with a trade deal.

Flynn’s number was a modelled estimate using fictitious assumption­s of growth that have since been revised down and generally dismissed by a series of economists.

No doubt the number will now become urban legend, repeated ad nauseum by pub bores and on social media to the applause of what can only be described as Pavlovian seals.

It followed a similar example of a Ghost Number from the Labour Shadow Chancellor, Rachel Reeves, when she accused the Tories of creating a £46bn black hole with their “unfunded promise” to abolish employees National Insurance contributi­ons. The calculatio­n for the number was never revealed and the Tories had not promised any such thing.

Jeremy Hunt had cut employees National Insurance by a further 2 per cent, resulting in a 4 per cent cut announced within a year. To emphasise the tax cut he expressed an attraction to removing employee National Insurance contributi­ons altogether, but did not provide an alternativ­e to raising lost revenues and also said it was unlikely to happen “any time soon”. It was all kite flying. Reeves saw this as an opportunit­y to warn of huge cuts to the NHS and state pension due to a black hole of her own imaginatio­n.

Then we had Rishi Sunak saying a Labour Government will cost us £2,000 each – an especially silly Ghost Number because it underestim­ates the cost of Labour’s spending pledges and overestima­tes the revenue from its announced tax increases. In other words it’s not as scary as it could be.

Labour's plan to decarbonis­e the power grid by 2030 is likely to cost at least £20bn per annum, not the £4.7bn in the Tory figures, and that’s just part of the vast cost of decarbonis­ation. £30bn p/a may be a more accurate estimate according to independen­t analyses like that of Aurora Energy Research and the National Grid itself.

Then there’s reducing competitiv­e tendering. Currently, councils spend over £80bn on out-sourced contracts and central government spends over £100bn – with tendering achieving savings in the 20-30 per cent range, according to numerous studies. Taking a more conservati­ve estimate of 15 per cent as the

Prime Minister Rishi Sunak may have underestim­ated the cost of Labour’s spending pledges and overestima­ted the revenue from its announced tax increases

No doubt the number will now become urban legend, repeated ad nauseum by pub bores and on social media

average saving, the extra cost of forcing 50 per cent of services back under monopoly public sector control would be at least £13.5bn, not the £2.3bn in the Tory analysis. The resulting increased costs will require more central subsidy or higher local taxes.

The Tories costed Labour's proposed ‘Fair Pay Agreement’ to increase pay in adult social care at £600 million p/a – but it would be more sensible to take the midrange of the Institute for Fiscal Studies' costing, which is £4bn per annum. On over estimating labour’ s tax revenues, the Tory calculatio­ns accept at face value Labour's claim to be able to raise another £3.9bn from closing the so-called tax gap. This implausibl­e assumption relies on large improvemen­ts in the efficiency of HMRC, an organisati­on that can’t even answer the phone.

In total, the Tories’ £2,000 cost of Labour policies is more like Casper the Friendly Ghost than anything shocking from the Blair Witch Project. The above observatio­ns cover only some of Labour’s policies but already imply significan­tly greater tax rises will be required than either the Tories predict or Labour admits. Now that’s truly scary.

Such scaremonge­ring does not mean we should not talk about numbers – but they should be the real numbers already available, such as the known costs of our state pension and public sector pensions that will eventually be impossible to finance by 2035. These are truly scary numbers but politician­s refuse to discuss them.

The current UK public sector net debt for next year is predicted to be £2.8 trillion, more than our entire GDP. Add to it the pension liabilitie­s, PFI costs and energy decommissi­oning costs and the “real national debt”, is over £12tn, more than the combined economic output of Africa, Central America, Australia, New Zealand, and Canada.

If that’s not scary enough a catastroph­ic cocktail of a growing and ageing population means we can expect to have 22.5m people claiming the state pension by 2040, but only 16.8m 16-65 year olds available to work to fund it.

Those are not imaginary but real figures and they are very, very scary indeed.

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