All three British major political parties are failing to come clean on spending cuts that will need to be at least as deep as the 1970s, a leading think tank warned Tuesday. Repairing the public finances will be the 'defining domestic policy task of the next government', the Institute for Fiscal Studies said at a special election briefing.
However, voters are unable to make an informed choice between the parties because none of them will spell out how this will be done, it warns. “The opposition parties have not even set out their fiscal targets clearly” said Robert Chote, director of the IFS. “And all three are particularly vague on their plans for public spending [...] The blame for that lies primarily with the Government for refusing to hold a spending review before the election”.
The difference between the parties on fiscal tightening is minimal, the IFS says although Tories do suggest completing the job a year earlier than Labour, in 2016-17.
“This would make the tightening even more front-loaded than it already is, at a time when the recovery remains fragile and the effectiveness of monetary policy remains under debate” Chote said. “But it would not make an enormous difference to the long term outlook for the public finances”. It was in the area of spending cuts, however, that the parties were being most disingenuous, he said.
“No party is proposing radically to change the size of the state from its pre-crisis level” Chote noted. “On spending, no party has announced plans for significant welfare cuts and without them, their plans would require deep cuts to spending on public services”.
“Over the four years starting next year, Labour and the Liberal Democrats would need to deliver the deepest sustained cuts to spending on public services since the late 1970s. While, starting this year, the Conservatives would need to deliver cuts to spending on public services that have not been delivered over any five-year period since the Second World War”.
The IFS calculates that Labour would need to announce further tax increases worth £7 billion a year to meet its stated goals. The Conservatives, meanwhile, would need to reverse around half of their planned £6 billion tax cut.
“When David Cameron said of the Liberal Democrat income tax cut, in the first debate: ‘It’s a beautiful idea. It’s a nice idea. We cannot afford it’, that is a slightly odd accusation for a party advocating a net tax cut to make of one advocating a net tax increase” he said.
By 2014–15 the Conservatives will need to find spending cuts worth almost £64 billion a year in unprotected areas of spending, the IFS calculates, compared to almost £51 billion for Labour and close to £47 billion for the Liberal Democrats.
“No party has come anywhere close to identifying where their savings would come from” Chote said. The Liberal Democrats have identified about a quarter, the Conservatives less than a fifth and Labour about an eighth of what they would need”.
The IFS also moved to counter politicians’ claims that much of the necessary shortfall could be closed by “efficiency savings”.
“Presumably the parties would try to spend public money as efficiently as possible whether or not they were trying to cut spending and would implement most if not all of these efficiencies anyway” he said. “And if the efficiencies the parties claim to have found to turn out to be genuine, then presumably whoever forms the government would strive to implement them”.