The Labour manifesto has confirmed a series of previously announced tax rises, raising just over £3bn. Like the Conservatives, its plans also rely on £5bn of savings from tax avoidance by 2028/29, though whether this is achievable is highly uncertain. ⁶ obr.uk/evaluation-of-hmrc-anti-avoidance-and-operational-measures/  Labour has also ruled out raising all of the major taxes – income tax rates, National Insurance contributions, VAT and corporation tax (which together raise three-quarters of all tax revenues). 

The revenue raised from proposed tax rises have been committed to a series of spending measures, which together cost £9-10bn a year by 2028/29: including net zero investment plans, the recruitment of 6,500 teachers, the introduction of breakfast clubs, and 40,000 more operations, scans and appointments every week in the NHS. 

On the face of it, then, Labour’s pledges are fully funded. Its spending plans appear to exceed the amount of new revenue by around £1bn, but the manifesto is clear a Labour government will borrow to raise some of the funding for its green prosperity plan. But, again like the Conservatives, it does not address the issue of how it would deliver the implausibly tight public service spending plans that are already pencilled in from 2025 – which imply real-terms cuts to several key services. 

The party’s frontbenchers have argued that their policies would improve growth, and therefore revenues, solving this huge fiscal problem. This focus on growth is undoubtedly important, but the narrative that it will enable them to avoid tough choices on fiscal policy will not survive reality. 

Raising GDP growth is far from a quick job. The Office for Budget Responsibility (OBR) is highly unlikely to upgrade the near-term growth forecast ahead of the next fiscal event, later this year, meaning soon after entering office a Labour government would be presented with the unenviable choice between sticking with the planned spending cuts, breaking or changing its fiscal rules – or finding a way to raise more revenue than announced in today’s manifesto.

Labour also confirmed welcome reforms to fiscal governance, including guaranteeing that every major fiscal event will have an independent OBR forecast, publishing a ‘roadmap’ for business taxation and – a longstanding IfG recommendation – committing to only one ‘major’ fiscal event a year. These are all welcome moves, but the real test will be whether the party will find it possible – practically or politically – to stick to these commitments should it enter office.