Reality check on Tories' PS2,000 tax claim

At first sight it may look as though I am getting carried away here but don’t be fooled – in actual fact this post could go on indefinitely and no doubt you too would love a piece like that to bring you pleasure & relaxation at any point in time! Rishi Sunak and Keir Starmer engaged in their inaugural head-to-head debate, in which tax was the central topic.The Prime Minister made an eye-catching claim about what his plans entailed for every individual, saying independent Treasury officials had costed Labour policies “and they amount to an approximate PS2,000 increase for all”. Starmer dismissed Sunak’s claim as “absolute garbage”, and Labour frontbench members have taken further measures, accusing Sunak of spreading an “egregious lie”. Sunak claimed Labour made spending pledges totalling PS38.5bn over four-year parliament without detailing how it will fund them. Conservatives argue that in order to meet its pledges, Labour would either need to borrow additional money or raise taxes. Borrowing more would violate Labour’s pledge of debt reduction, so Sunak said in the TV debate that Labour planned on raising taxes by PS2,000 per household by the end of next parliament. Tories hope for another win like their 1992 success when campaign was centred around Labor plans of using higher taxes to pay for more generous benefits than originally projected by them. So where has PS2000 figure come from? Conservatives claim Labour made spending commitments totalling PS58.9bn up until 2028-29 which they attribute as the basis for such figure being determined? According to them by totalling spending commitments totalling PS58.9bn by 2028-29! Sunak states that Labour’s announced tax increases, such as adding VAT on private school fees, would raise PS20.4bn during that same time frame – leaving an “empty pot” of PS38.5bn; of which 18.4m households in Britain with at least one person eligible to pay tax have an account balance due. Divide PS38.5billion by 18.4million households to get an estimate of average working household expenditure at PS2,094. What Does Labour Say About This Claim? It has long been claimed by Labour and when this claim first made headlines last month they issued an extensive response which can be read here. Labour said the costings in the Conservative’s document contained 11 “glaring mistakes”. Starmer made several mistakes during the TV debate: such as using assumptions made by special advisors who work directly for ministers instead of cost estimates prepared independently by Treasury civil servants; Starmer failed to challenge Sunak until 12 times had passed since she first mentioned her claim, then only did so after repeated repetition by Prime Minister Theresa May; helpfully for Labour James Bowler wrote directly to Shadow Chief Secretary Darren Jones to make it clear the PS2,000 figure must not be presented as having come from civil service sources. Letter was delivered the day prior to ITV debate but wasn’t mentioned by Starmer or Bowler during discussion of Sunak using PS2,000 figure as his minimum salary requirement for candidates running against Starmer for office in 2018. So is this just some dodgy dossier? Not entirely. Conservatives have identified Labour’s Green Prosperity Plan as its signature spending commitment, although its initial pledge of spending PS28bn on greening the economy may have been watered down over time; nonetheless, Labour estimates it will spend $23.7bn over five-year parliaments on green prosperity plans (GPPs). Conservatives claim this would total PS19bn over four years – an accurate calculation. Labour has yet to disclose how it plans on funding additional spending; one option could include borrowing more while adhering to its debt limit rules. But are there more contentious assumptions at play here? Absolutely. Labour has pledged to end contracting out public services to private providers. Conservative Party lawmakers claim insourcing services would cost PS6.5bn over four years, citing research conducted by Institute for Government (IfG). They state contracted-out services are 7.5% more cost-efficient. The IfG report doesn’t mention outsourcing directly; rather it mentions its impact as patchy. Indeed, the IfG report specifically advises against using 7.5% as it has little confidence in this figure. Furthermore, Conservatives have placed an estimated cost of PS4.5bn on Labour’s pledge of free breakfast clubs at primary schools. It assumes that half of pupils accept their offer – an extremely unlikely scenario – and that under a Labour government they would cover both staffing costs as well as food provision costs. Some policies costed by Conservatives such as mental health workers are actually policies promoted by Labour rather than costed separately by them. Others, like golden hellos for NHS dentistry, have already been adopted by the government.What about Labour’s tax plans?Labour has announced some limited and specific tax increases as funding sources to meet its spending commitments – again raising questions over assumptions made by Conservatives in these discussions. Once VAT is levied on school fees, some children currently enrolled privately will likely move back into public education; though the exact numbers have yet to be confirmed. Conservatives assume 11% will enact their strategy but success remains to be determined – they could find themselves up against an uphill battle! Taxes have increased substantially during the past four years and as a proportion of national income are on course to become the highest they’ve been for more than seventy years. However, Conservatives also face shortfall issues as their plans to abolish employee national insurance contributions would cost PS46bn per annum – according to Labour estimates. Think-tanks such as Institute for Fiscal Studies and Resolution Foundation question whether either Labour or Conservative will meet their debt regulations without borrowing more, increasing taxes further or making severe public spending cuts.