The main political parties have been accused of keeping voters in the dark about the spending cuts and tax rises that will be needed after next May’s general election.
The Resolution Foundation think tank, which studied the plans of the Conservatives, Labour and Liberal Democrats, said all three should be more open with the public about how they would tackle the deficit.
Matthew Whittaker, the foundation’s chief economist, said: “Meeting the fiscal targets set out by the main political parties could mean a redrawing of the boundaries of the state due to swingeing cuts, significant new taxes, or a slower path of deficit reduction and more debt – or a mix of all three. Yet no party has really made clear which it’s going to be.”
He added: “The electorate shouldn’t be subjected to another largely empty fiscal debate like it was at the last election. Currently we are facing a candour deficit as well as a fiscal one.”
Mr Whittaker admitted that uncertainty over the public finances made it impossible for the parties to provide full details of fiscal plans yet. But he insisted: “The gap between the scale of consolidation implicit in their plans and what the electorate has been told to date is just too large.”
According to today’s study, the Tories would need to find another £37bn to balance the books on top of the £8.5bn of cuts planned in the 2015-16 financial year. George Osborne has called for £12bn of welfare cuts, but has found only a quarter of this amount. The foundation said the pace of cuts would need to accelerate after 2015-16 for the Tories to remain on course to achieve their promise of a budget surplus by 2018-19, particularly as the Chancellor has said no new tax rises would be needed. The Tories might need even bigger savings to meet the £7.2bn of unfunded tax cuts promised by David Cameron.
The Lib Dems would balance the books on day-to-day but not capital spending such as infrastructure projects by 2017-18, with 80 per cent found by cuts and 20 per cent from tax rises. The study estimates that this could mean cuts of between £15bn and £25bn and tax increases of between £4bn and £6bn.
Labour would have a “less stringent and more flexible target”, after promising to clear the deficit on day-to-day spending but not capital projects “as soon as possible” before 2020. According to the foundation, Labour would need to find savings of between £4bn and £13bn. A less severe path would mean higher levels of debt and higher interest payments for longer.
The report warned that all three parties were likely to find the next phase of cuts harder to achieve than those made since 2010. “Many of the ‘easiest’ cuts have already been made, while the parties’ assumed ongoing commitment to protect specific budgets such as health, schools and [international] development will place an even greater strain on non ring-fenced departments,” it said.
The foundation said the “already daunting fiscal challenge” could become even tougher because of weaker than expected tax revenues.
Last night Labour announced that it had found £250m of savings in the Home Office budget which it would use to protect frontline policing. They would include £172m a year from joint purchasing by police forces and £50m by scrapping elected police and crime commissioners. The move is part of Labour’s “zero-based” budget review.