Think-tank casts doubt on credibility of both Labour and Tory tax and spending plans

  • Video report by ITV News Business and Economics Editor Joel Hills

Neither the Tories nor Labour is offering a "properly credible prospectus" in their General Election manifesto spending plans, a leading economic think tank has said.

The Institute for Fiscal Studies (IFS) said it was "highly likely" that a Conservative government would end up spending more than the party's manifesto implied - meaning either taxes or borrowing would have to rise.

It said that Labour would not be able to deliver on its promise to raise investment levels by £55 billion a year as the public sector does not have the capacity to "ramp up" that much that quickly.

It was "highly likely" that a Labour government would have to find other tax increases beyond those it has announced for big business and the better off if it was to raise the extra £83 billion a year in additional revenues it wants.

"In reality, a change in the scale and the scope of the state that they propose would require more broad-based tax increases at some point," said IFS director Paul Johnson.

Mr Johnson said the chances of the Conservatives being able to hold spending down over the course of a five year parliament in the way that they proposed appeared to be "remote".

"Why have they been so immensely modest in their proposals? Because to do otherwise would either mean resiling from their pledge to balance the current budget or would mean being up front about the need for tax rises to avoid breaking that pledge," he said.

Labour leader Jeremy Corbyn said he welcomed scrutiny from the IFS and that he was confident he would be able to deliver all manifesto plegdes - including not putting taxes up on anyone earning under £80,000.

Presenting the analysis of the election manifestos of the main parties, Mr Johnson said the choice between the Tories and Labour could "hardly be starker".

He said the Conservative plans if delivered would leave public spending - apart from health - still 14% lower in 2023-24 than it was when the Tories came to power in 2010-11.

"No more austerity perhaps, but an awful lot baked in," he said.

In contrast, he said that Labour would raise both taxes and spending to peacetime highs, with the national debt set to rise by around 3% of national income.

However, he said that Labour's promise to abolish in work poverty within a parliament was "not achievable".

And he expressed concern about about its pledge to commit £58 billion to compensate the so-called "Waspi women" who claim to have lost out as a result of pension changes under the coalition government.

Chancellor Sajid Javid could still be facing a spending squeeze. Credit: PA

He said it mean spending more on a group who were on average "relatively well off" than the party was proposing to spend on the much larger and much poorer group of working-age benefit recipients.

"To believe the whole group should receive compensation is a recipe for complete stasis in policy," he said.

"Clearly some suffered hardship and there may be scope for much more limited compensation."

Responding to the IFS criticism of Labour and the Conservatives spending plans, Ms Swinson said of the Lib Dem proposals: "We're working on the basis of what would actually work.

"I know that seems to have gone out of fashion a bit, but I think its important that you have confidence to deliver your plans.

"We are borrowing £130bn for capital investment. That is a huge amount, and its also about making sure we can get those projects working and still be delivering good value for money for people."