In all of the excitement about the Labour Manifesto we seem to have forgotten that the LibDems also put their proposals forward too. Which might be a metaphor for a campaign full of sensible proposals but strangely forgettable.
The LibDems overall fiscal frameworks is slightly tighter than Labour, but using similar rules. The LibDems want to balance the books and reduce the deficit but they want to do it and the end of year one of a new Government, while Labour want to balance the books at the end of year 5. Instinctively this is a big ask, and I’m not sure it is achievable. It also looks that they will try and leave office with less debt than they started with, something Labour and the Tories have given up on.
I can see something around £50bn of extra spending (less than Labour’s £80bn+) but still huge by recent standards.
All of the big spending commitments are all in education and early years.
The biggest single commitment is quadrupling the size of free early years childcare costing £13bn, plus another £1bn to reverse cuts to Sure Start. Not far behind in cost is an extra £10bn for schools. Rather than free tuition fees the LibDems are offering maintenance grants not loans, which is a lot cheaper, less than £1bn. As you know I think that the free tuition fees policy is an expensive and regressive way to increase, and I am not sure if the maintenance grant policy is better other than being cheaper. The extension of early years childcare is the biggest expansion to the welfare state that any party are offering.
On NHS Spending the LibDems are offering pretty much the same as Labour, and on re-instating Tory cuts to benefits they are more generous, offering £10bn compared to Labour’s £8.4bn. In both cases the poorest wouldn’t get back all that they have lost under the Tories.
The LibDems are following Labour in announcing additional capital spending; £26bn pa for the LibDems vs £55bn pa for Labour. However the LibDems aren’t planning on whole-scale nationalisations, so all of this will go into new capital infrastructure projects. In terms of new roads, schools and hospitals the impact will probably very similar to Labour, but at a much lower cost.
The extra spending means extra taxes.
The LibDem tax proposals are much smaller than Labour -they claim they can balance the books faster than Labour with only £37bn of tax increases – nearly £50bn less than Labour. The tax rises hit the same areas – higher rate tax payers, corporation tax, IHT.
The big difference is the Brexit dividend. The LibDems are claiming a £14bn remain bonus – a boost to public finances by cancelling Brexit. This is a brave claim, but credible. After years of austerity, and Brexit uncertainty the combination of a sensible increase in Government spending and a clear path to remain should boost the economy and Government finances
So what don’t I like…..
I don’t like the proposals for a hypothecated health and social care tax. I am a 1947 NHS pendant, and I believe in socialised healthcare funded out of general taxation. Call me old fashioned.
The proposals for extra taxes on frequent flyers look complex and hard to administer
The assumptions on the amounts they can raise from generalised anti-avoidance measures look toppy.
But other than that, it’s a really great set of proposals. Not as expansionary as I would like, but I love that they are stopping Brexit. The LibDems big problem isn’t economics or fiscal policy, it’s politics. They need to find a way to catch the public’s attention long enough to explain their plans.
So far they haven’t managed that.