The Labour Party’s done the sums. This is what it all means
The Labour Party was the first to release its manifesto for the upcoming UK General Election. Over 100 pages of ideas for what it wants Britain to be like if it wins on 8 May.
Alongside its manifesto, Labour also published a two page document about how they would fund all their policies, which Labour says is the “most comprehensive costing exercise, provided by any political party, at an election in recent times”.
No other major party has done this, but Labour has been coming under so much criticism about the affordability of their plan that they must have felt they had to show it wasn't going to run the country into the ground.
Whether or not that's worked is another question. Some are saying it's a revolutionary, never-before-seen plan to save Britain, others are saying it's a death sentence doomed to drive us into eternal debt. Whichever it is, what we do know is that there’s a lot of jargon to de-jargon. You can see the full document, footnotes and all here.
The first page sets out how much they’re going to spend – a couple billion here, a few tens of billions there – which comes to a grand total of £48.6bn. The other page sets out the money their policies will bring in – and lo-and-behold, it all comes to a handy... £48.6bn. Convenient, that.
What's going out?
The document splits up the party’s spending plans into sections. First up is its plan for a National Education Service. A big part of this is the plan to scrap tuition fees and provide a maintenance grant for students (this is going to cost £11 billion, the document says).
Next, health care – a £2.1 billion for social care (including things like care for the elderly) which Labour says will relieve strain on hospitals. There’s also £5 billion just written down as ‘healthcare’, but pretty light on what that's actually for. It includes Labour’s plan to remove hospital car parking charges, but excludes higher salary costs and the money the health system spends on things like property and equipment, called its ‘capital expenditure’ – where that money is coming from, we’re not sure.
The next section is on work, pensions and benefits policies. They plan on spending £4 billion on reversing the government’s recent cuts to the welfare system (you can read our story on those cuts here).
The final section of the spending plans deals with other random policies they couldn’t fit in the first three, including a plan to raise the minimum wage from its current level of £7.50 to £10 an hour for everybody by 2022. This sounds expensive, but Labour’s saying the minimum wage rise plus a pot of extra money to support small businesses that struggle to pay it will cost a grand total of £0.00.
How? Well, in the footnotes of the document, Labour points to a couple of studies which claim that the benefits of having higher wages – higher tax intake and less money spent on welfare, for example – outweigh the costs, called a ‘net benefit’. They’re guesstimating that net benefit will cover the cost of the extra support for businesses too.
And what's coming in?
All the money Labour’s calculated coming in comes from new tax policies. It’s a pretty fundamental Labour party belief that spending more is good for people, and good for the economy. To pay for it Labour wants to increase taxes for the rich and for businesses, and put that money back into public services.
Measures include higher corporation tax (a charge for doing business in the UK), raising income tax for people earning over £80,000 a year – the top 5% of people in the UK – and a pretty lucrative crackdown on people that don’t pay their tax, which it says will raise £6 billion.
The thing is, there's not really a guarantee that this money is really going to come in. It’s almost impossible to really know how much tax you’re going to raise – corporation tax, for example, is a charge based on a company’s profits and you can’t really know how much a company is going to make in the future.
There’s also a big possibility that if you start charging big businesses and high earners loads of tax they could just decide enough is enough and wave goodbye to the UK for good, which means no tax revenue at all to the government. The document does kind of acknowledge all these risks; they've made a -£3.4 billion 'allowance' for any uncertainty. Let's just hope that would be enough...
What's being borrowed?
The third section of Labour’s funding doc outlines a £250 billion fund for transport, communications, research and energy. It would pay for a high speed rail to Scotland, fast links between cities in the North of England, and low-carbon gas and renewable electricity generation.
Unlike the other commitments made in the manifesto, this doesn’t fit into that handy balanced £48.6 billion figure – in other words, Labour can’t pay for it with the tax money it’s raising. Instead, it wants to borrow – kind of like how we'd borrow money for a big investment, like buying a house. Which rings alarm bells for a lot of people who feel strongly that we should reduce the .
Labour aren't worried about that though – they say they want to take advantage of ‘historically low interest rates’ – the charge you pay to borrow money – to raise the cash, which it will then reinvest on things (like trains) that will make money in the future.