Election '97: Parties' economic flaws revealed

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The Independent Online
The tax and spending policies set out in the party manifestos will be put under the spotlight this morning. The results are likely to prove uncomfortable for both main parties, as the torch probing the dark corners of their economic strategies is being wielded by the fiercely independent Institute for Fiscal Studies.

The IFS election briefing will look at how much better off different categories of people have become since 1979 and 1992, which will provide opponents of the Government with plenty of useful ammunition. The Treasury's own figures show that taxes have increased as a share of national income since both dates, and the IFS analysis is expected to show that the well- off have done much better than the poor out of 18 years of Conservative government.

Today's report will assess the underlying state of the public finances, and how big a "black hole" there is in the government's budget. Other think-tanks, notably the National Institute for Economic and Social Research, have said the shortfall between revenues and expenditure is about pounds 14bn bigger than would be expected at this stage of the business cycle.

The document will also note that the Conservative manifesto leaves open the possibility of a radical contraction in the boundaries of the welfare state via the privatisation of pensions and possibly other areas of government provision.

The charges will carry all the more weight because the IFS has carved out for itself a uniquely authoritative position in commenting on taxation. Its reputation for being non-partisan will be enhanced by other conclusions in today's report.

This will criticise Gordon Brown's pledge to stick to the existing government spending totals for the first two years of a Labour government. Andrew Dilnot, the IFS's director, has made no secret of his view that the sharp slowdown in real-terms spending implied by the existing plans will be catastrophic for the provision of some public services.

The institute has argued that the minimum wage will have little effect on poverty and could cause unemployment if the mechanism for up-rating it is not designed with great care. The reason is that a minimum wage would do nothing for the out of work and pensioners, who make up the bulk of the poorest tenth of the population.