Think-tank slams parties’ election silence on deficit reduction

Written by Jim Dunton on 11 May 2017 in News

Resolution Foundation flags potential £50bn public spending gulf ahead of scheduled cuts to departmental budgets

Credit: PA

England’s two main political parties are not doing enough to spell out their fiscal strategies ahead of next month’s general election, despite the impact those plans will have on public services, a think-tank has warned.

A new report from the Resolution Foundation says that despite public spending plans dominating both the 2010 and 2015 general elections, “huge uncertainties” remained about the main parties’ deficit-reduction approaches for the next five years, with the potential for a difference of more than £50bn.

The foundation, dedicated to improving the living standards of people on low-to-middle incomes, said billions of pounds worth of cuts that form part of the current government’s spending plans had yet to bite, including £8bn of welfare savings and £3.5bn in yet to be allocated cuts for 2019-20. 

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It said that coming on top of the already sizeable cuts that some departments have endured since 2010-11, such spending reductions had “clear implications” for public service provision.

The report, titled The Deficit the Election Forgot, said that while the deficit had fallen from an economic crisis peak of more than 9% of gross domestic product to 2.6% now, it was still above its historic long-term average of 1.8% and continuing to deal with it would frame the next government’s policies.

Authors Torsten Bell and Matt Whittaker said it was vital for both the Conservatives and Labour to clarify their deficit reduction stances in next week’s election manifestos because their present policies had huge scope for variation.

They said the interpretations of the Conservative Party’s current fiscal objectives gave it £47bn worth of leeway over the course of the next parliament because its “fiscal mandate” offered the potential for £30bn of loosening, while its “fiscal objective” of an overall budget surplus implied additional tightening of £17bn.

They said the latter option would require either significant tax rises or increasing the pace of spending cuts over the next decade.

Bell and Whittaker said the Labour Party’s “fiscal credibility rule” would allow for up to £37bn of fiscal loosening on the current budget by 2021-22, which would allow it to reverse the current government’s yet-to-be-implemented spending cuts, but would slow the reduction of debt relative to GDP.

Foundation chief economist Whittaker said that while Labour and the Conservatives went into the 2015 election with fiscal plans that were £30bn apart, the lack of clarity surrounding their plans meant the gap could have narrowed to just £7bn, or widened to over £50bn. 

“This scale of uncertainty is unacceptable – voters deserve more clarity than they’re currently getting from the main political parties,” he said.

“With just four weeks to the general election, the forgotten deficit should reappear in the parties’ manifestos next week."

Think-tank director Bell said it was understandable that voter fatigue, a dropping deficit level, and the distraction of Brexit had altered the priority given to the nation’s finances. 

“But it remains a very important issue,” he said, “determining the policies the next government will pursue from public services to tax, the debt level we leave to the future, and the way in which we respond to the big issues of our time – from Brexit to an ageing society."


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