Main parties are blamed for conspiracy of silence on cuts

Institute for Fiscal Studies condemns failure to tell voters the truth about spending plans

Economics Editor,Sean O'Grady
Wednesday 28 April 2010 00:00

A damning indictment of the failure of all three political parties to tell the public the truth about the painful spending cuts that must follow the election has been issued by the nation's leading think-tank on the public finances, the Institute for Fiscal Studies.

The IFS, which is independent of political influence, says that the as-yet unspecified cuts in spending amount to some £52.5bn in the case of the Conservatives, £44.1bn for Labour and £34.4bn for the Liberal Democrats – which are the sums each party will have to find if they are to meet their stated aims for deficit reduction.

They imply deep cuts in almost every public service. The Conservative Party figure is larger than those for the other two parties because it has said it wants to cut public borrowing sooner and faster, and that it would put less emphasis on tax rises.

The IFS indicated that even now, a week before polling, the public is not being prepared for the age of austerity that will follow the election, which will involve the largest spending cuts since the Second World War if the Tories win, or since the 1970s in the case of Labour and the Liberal Democrats.

The institute's director, Robert Chote, condemned all the parties for being "strikingly reticent" about their true intentions and for their failure to come clean on precisely where cuts would be made. Mr Chote added: "The opposition parties have not even set out fiscal targets clearly, and all three are particularly vague on their plans for public spending. The blame for that lies with the Government for refusing to hold a spending review before the election."

The IFS says both Labour and Conservative plans imply future tax hikes, above those already announced, despite pledges suggesting the reverse.

The IFS's judgement comes as Nick Clegg, Gordon Brown and David Cameron prepare themselves for tomorrow's final televised debate, on the economy. For Mr Clegg it may prove especially uncomfortable as he has tried to portray himself as more transparent and honest than the others.

Even so, the Liberal Democrats come out best from the IFS's scrutiny – but only because Labour and the Tories fare so badly. Some 87 per cent of Labour cuts are not spelled out, said the IFS, while 82 per cent of Mr Cameron's plans are also vague. Despite Vincent Cable's boast to be superior to his rivals, the IFS estimates that 74 per cent of Liberal Democrat cuts remain in the realms of supposition. More damagingly still for Mr Cable and Mr Clegg, the IFS has repeated its scepticism that the Liberal Democrats will be able to find more than £4bn in additional tax revenues from a clampdown on evasion and avoidance, as they have claimed.

The Prime Minister has described the campaign as "the big choice election", but the IFS suggests that whoever gets into power will find little room for manoeuvre. Mr Chote commented: "The Conservatives would still end up borrowing £604bn over the next seven years, just 6 per cent less than Labour and the Liberal Democrats. And, assuming no further change in borrowing beyond 2017–18, the Conservatives would bring government debt back below 40 per cent of national income in the same year as Labour and the Liberal Democrats."

So far as the impact of the parties' plans on the richest and poorest are concerned, the IFS says that the tax and benefit changes already in the pipeline from Labour are progressive "taken as a whole", with small losses for poorer households that increase in size as households get richer. 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.

The Liberal Democrats would make the pattern more progressive, redistributing resources from the wealthy to middle-income households, though not the poorest, as their idea of raising the income tax threshold to £10,000 only helps those who pay income tax, leaving aside those on benefits.

Lord Mandelson sought to bat away attacks by saying that the IFS was not standing in the general election and that opposition parties spanned a "coalition of cuts for kids''. Philip Hammond, the shadow Chief Treasury Secretary, claimed: "If the government published a comprehensive spending review they would set a baseline and that would be a challenge to the opposition parties then to respond." Mr Clegg said he was "delighted" with the IFS report.

Tell us the truth on the economy

Labour: £44.1bn of cuts remain undefined

The promise

"As we more than halve the fiscal deficit over the next four years, we will ensure that we do so in a fair way with a combination of a return to economic growth, cuts to lower priority programmes and fair tax rises." Labour manifesto 2010

The reality

According to the politically independent Institute for Fiscal Studies, Labour has not explained how it would achieve 86.9 per cent of the £50.8bn cuts implied by its spending plans

Conservatives: £52.5bn of cuts yet to be specified

The promise

"We have set out a credible plan to eliminate the bulk of the current budget deficit over a parliament. We will make real terms annual increases in health spending and meet our commitment to increase international development ... but cuts will be made in other areas." Conservative manifesto 2010

The reality

The Conservatives have not explained how they would achieve 82.3 per cent of the £63.7bn cuts implied by their spending plans.

Lib Dems: £34.4bn hole in deficit reduction plans

The promise

"We must . . . be bold about finding big areas of spending that can be cut . . . We have identified over £15bn of savings in government spending per year. All our spending commitments will be funded from this pool of identified savings, with all remaining savings used to reduce the deficits." Liberal democrat manifesto 2010

The reality

The Liberal Democrats have not explained how 74.1 per cent of the £46.5bn cuts implied by their spending plans would be achieved

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