Unclear deficit strategies 'depriving voters of informed choice'

The three main parties are depriving voters of an "informed choice" by failing to give details of how they will tackle the deficit, an influential think-tank said today.

The Institute for Fiscal Studies (IFS) said whoever wins the General Election will have to bring in the biggest cuts in public services for a generation.



IFS director Robert Chote also insisted Tory proposals for introducing earlier cuts would "not make an enormous difference" to the government's finances in the long-term, and criticised David Cameron's commitment to halting Labour's scheduled National Insurance hikes.



Unveiling an analysis of the parties' policies on tax and spending, Mr Chote said: "For the voters to be able to make an informed choice in this election, the parties need to explain clearly how they would go about achieving it. Unfortunately, they have not.



"The opposition parties have not even set out their fiscal targets clearly.



"The blame for that lies primarily with the Government for refusing to hold a Spending Review before the election."



Labour and the Lib Dems wanted to start reining back spending next year and be saving £71 billion a year - roughly the size of the structural hole left by the credit crunch - by 2016-17.



Meanwhile, the Tories would begin cutting this year, and complete the process a year earlier, according to Mr Chote.



"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," he said.



"But it would not make an enormous difference to the long term outlook for the public finances.



"The Conservatives would still end up borrowing £604 billion over the next seven years, just 6% less than Labour and the Lib Dems.



"And, assuming no further change in borrowing beyond 2017-18, the Conservatives would bring government debt back below 40% of national income in the same year as Labour and the Lib Dems."



Mr Chote said that no party had brought forward proposals for significant welfare cuts, which meant reductions in spending on services would have to be deeper.



"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," he said.



"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 estimates that Labour would have to find further tax rises worth £7 billion a year in order to meet its plans, while the Tories would need an extra £3 billion to meet theirs.



By 2014-15 the Conservatives would need to find cuts of nearly £64 billion a year, Labour almost £51 billion and the Liberal Democrats almost £47 billion.



But no party had come "anywhere close" to identifying where these savings would be made. The Liberal Democrats had identified about a quarter, the Conservatives less than a fifth and Labour about an eighth, according to Mr Chote.



The IFS also criticised the parties for making "misleading" claims that spending reductions could be met through 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," Mr Chote said.



He warned that it appeared the parties were being "overambitious" about how much could be cut from public expenditure, suggesting that the next government would have to rely much more on "tax increases and welfare cuts" than anyone was currently admitting.



Mr Chote said the tax and benefits changes proposed by Labour were "progressive taken as a whole", hitting poorer households less hard. The Lib Dems' plans - including reform of income tax - would redistribute resources from the wealthy to middle-income households, but not to the poorest.



He went on: "The Conservatives would make the pattern less progressive, reducing the losses of households at the top of the income distribution proportionately more than those at the bottom."



He said the Tory package would encourage unemployed people to get into work, but would not push most existing workers to earn more.



Mr Chote also hit out at Mr Cameron's plans for reversing the bulk of scheduled hikes in National Insurance.



"Looking at the structure and efficiency of the tax system, Labour's pre-announced measures are not an attractive package (even given the need to raise revenue)," he said.



"The Conservatives would not improve matters. They would partially reverse what is probably Labour's least bad tax increase and add new complexities and distortions of their own.



"The Lib Dem package would remove some undesirable distortions and inconsistencies of treatment.



"But their plan to restrict pension contribution relief is misguided. Although it is somewhat more coherent and less complex than the other parties' plans it applies to many more people."

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