General election round-up: Tax pledges and titbits

Civil Service World looks at what the main parties have said this week – and the impact for the civil service
Eyes right: Rishi Sunak on the campaign trail earlier this week Photo: Conservative Party/X

By Jim Dunton

31 May 2024

Ten days into the 2024 general-election campaign, party leaders might be eating up the miles, criss-crossing the nation in a bid to connect with voters in key constituencies, but they're still limbering up in policy terms.

Some Westminster watchers argue that prime minister Rishi Sunak's decision to "go early" with a 4 July election has caught other parties on the hop in terms of refining their offer to the electorate. It's certainly true that in recent days Sunak has had the most titbits to trail.

We're a couple of weeks away from the publication of party manifestos, clarifying distinct offers to the nation from the Conservatives, Labour, the Lib Dems and others.

While pledge-packed manifestos don't always bear a strong correlation to what parties actually deliver when they win power, they're as good a starting point as it's possible to get. And their contents are famously embarrassing to wriggle out of once they're committed to print – as Theresa May discovered to her cost in 2017 with social care plans that became dubbed the "death tax".

On the opposite side of the coin to ruling in policies, the Conservatives, Labour and the Lib Dems have this week all ruled out raising income tax, national insurance or VAT if they hold power after the election.

A relief for taxpayers, the statements should not be a source of reassurance for public services. With the spending plans pencilled in for the next five years at the Spring Budget unrealistically tight in the estimation of many – including the Institute for Fiscal Studies, the logical conclusion of no extra income from taxation is service cuts.

In March, chancellor Jeremy Hunt recognised the gulf between departmental needs and proposed annual increases in public spending of just 1% over the coming years. He argued that the government's Public Sector Productivity Programme will fill the gap, with departments delivering efficiencies of around 2% a year to increase spending power.

Reducing the size of the civil service to 2019 levels – equating to a reduction of around 70,000 people – is nominally part of the plan, in conjunction with greater use of artificial intelligence. However Sunak has also claimed that savings from the civil service payroll will fund proposals to increase defence spending to 2.5% of gross domestic product by 2030.

Both the IFS and the Institute for Government have been sceptical that civil service headcount cuts will cover the defence pledge, so the chances of role reductions also contributing to a civil service productivity boom are even less likely.

Nation of sceptics

An opinion poll published in the Financial Times today finds that the public expects that both of the main political parties will put up taxes if they win the election. The Ipsos survey said 52% of a sample pool of 2,000 voters quizzed over the bank holiday weekend expected the Conservatives to put up tax and 56% expected Labour to do so if they take power after 4 July.

The survey found that 37% of the pool were in favour of higher spending on public services rather than tax cuts. Thirty per cent took the opposite stance, while the remainder said they did not know.

Breaking the survey results down by the way respondents voted at the last general election, the FT said 57% of Lib Dem supporters were in favour of boosted public spending rather than tax cuts. For past Labour voters, the figure was 49%. Just 33% of those who voted Conservative in 2019 preferred increased public spending to tax cuts.

Grey votes matter

If the current financial picture wasn't tough enough, Sunak upped the ante this week by proposing a "triple lock plus" for pensioners. The triple lock currently sees the state pension rise by whichever is the highest out of inflation, wage growth, or 2.5%.

Under the "triple lock plus" the threshold for pensioners to become liable for income tax would increase over the course of the parliament, meaning that the state pension is never subject to income tax.

While Sunak billed this as a tax cut for pensioners, the policy also underscores that the threshold won't be raised annually for everyone – as was routinely the case until 2021. The threshold is currently frozen at £12,570.

The IFS pointed out that the policy was effectively a reversal of a previous Conservative-led decision because pensioners used to have a higher – and therefore more generous – income tax threshold than younger taxpayers until the system was abolished by the coalition government of David Cameron.

The IFS added that while the Conservative Party said the policy would cost £2.4bn by the end of the next parliament, the real annual cost to the exchequer would continue to rise over time. "Ultimately, indexing a tax threshold using the triple-lock mechanism would be storing up troubles for the future," it said.

A new apprenticeships drive

On Wednesday, Sunak said a Conservative government would deliver an additional 100,000 apprenticeships a year by the end of the next parliament, funded by previously announced proposals to scrap "rip-off degrees that make students poorer".

The PM said that since 2010 the government had delivered more than 5.8 million apprenticeship starts, with "nearly 70%" of occupations covered by apprenticeships.

The civil service and other parts of the public sector could be expected to play a leading role in the delivery of new apprenticeship places – as has been the case in recent years. So despite likely headcount reductions, creating a broadened education-and-training offer could be around the corner if the Conservatives win the 4 July election.

Hitting apprenticeship targets has not always been easy for departments and some have also struggled more than others to retain apprentices through to the completion of their programmes.

Swapping economic development for National Service

Arguably Sunak's most controversial campaign-trail titbit of the week has been the Conservative Party's £2.5bn proposals to set up a new National Service scheme.

Although "bring back National Service!" has been a clarion call of some old enough to be compulsorily drafted into the Armed Forces for two years between the late 1940s and the early 1960s, the Sunak version is somewhat different.

Military service will be an option, however other forms of volunteering will also be acceptable and – in any case – the exact details of how the service would work will be thrashed out by a Royal Commission in the event of a Conservative victory at the polls.

Foreign secretary Lord David Cameron will also be able to share valuable insight from the National Citizen Service that he introduced as PM.

Most controversially, under the Conservative Party's National Service plans, £1.5bn of the annual funding required for the project would come from winding up the UK Shared Prosperity Fund. The fund is intended to replace regional development money distributed from the European Union.

The IFS said abolishing the UKSPF and channelling the cash to a new National Service scheme would "represent a significant reduction in funding aimed at tackling geographic inequalities".

The think tank added that the move, which would apply from 2028, also implied a "significant disconnect between rhetoric on the importance of ‘levelling up’ and actual funding policy".

Shadow chancellor Rachel Reeves said the National Service plan was an "expensive gimmick".

Vallance backs Labour's clean-power push

This morning, Labour leader Sir Keir Starmer was in Scotland setting out further details of his party's plans to create a publicly-owned clean-power company named Great British Energy to deliver cheaper power for the UK.

Labour now says that its proposed windfall tax on large oil and gas companies will provide £8.3bn to fund the company – which will be based in Scotland – over the next five years.

As well as providing increased energy from renewable sources such as wind and solar, the firm will also invest in new technologies, such as hydrogen and carbon capture and storage.

Former government chief scientist Sir Patrick Vallance gave his backing to the Labour Party proposals, which also include decarbonising the UK's electricity supply by 2030 – five years ahead of the current timescale.

Writing in the Times today, Vallance said he was often asked which of Britain’s pressing public policy challenges needed an approach similar to the all-out national effort that was spearheaded by the Vaccine Taskforce in the early months of the Covid-19 pandemic.

He said combatting "excessive carbon emmissions, high energy bills and energy insecurity" through the acceleration of the transition to net-zero emissions was such a challenge.

"For the past few months, I have been working with the Royal Academy of Engineering on a study on how to accelerate the decarbonisation of the power system – working with engineers, industry experts, academics, and policy specialists," Vallance wrote.

"Given the central role of electricity in our economy’s clean energy future, this is the linchpin of a successful pathway to net zero.

"If Britain takes a lead we can be the innovators and implementers, and both help ourselves and export solutions to the world. If we choose to go slowly others will provide the answers and we will ultimately end up buying the solutions rather than selling them."

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