Forget talk of Labour’s “tax bomb”. It’s conservative politics that requires a watchful eye | Larry Elliott

TThe contours of the electoral campaign are becoming clearer. Do the Conservatives deserve another five years to try to improve Britain’s lot, despite the abject failure of the last 14 years? Can we trust the Labor Party led by Keir Starmer to do better?

At the start of a crucial new year for British politics, Rishi Sunak hopes this latest question will resonate with voters, as the Tory election machine revs up to portray ‘Slippery Starmer’ as an untrustworthy Labor leader, high taxes and high spending, which would bankrupt Britain.

It’s a familiar ploy. Since Labour’s defeat by John Major in 1992, the Conservatives have recycled versions of their ‘tax bomb’ attack line and more often than not it has worked, aided by the mess of the 2008 financial crisis This time, however, talk of Labor’s unexploded ordnance is petering out.

Despite a precipitous National Insurance cut over the weekend, most voters know the cost of living is not falling. The economy remained a smoking ruin after 14 years of Tory rule, with Liz Truss’s car crash just the tip of the iceberg.

Before the election, Labor faced criticism over how it will fund its £28 billion commitment to invest in green industry. But Tory backbenchers are calling for multibillion-pound tax cuts, with far more questionable economic benefits. Lacking humility, former Truss chancellor Kwasi Kwarteng calls for ‘bold tax cuts’amid a bidding war among conservatives to decide the biggest electoral mistake.

Despite all the attention paid to the taxes and spending of a future Labor government, we must not forget to remember the path charted by the Conservatives: the Conservative plan, described as “simply implausible” by the Labor think tank. Institute for Fiscal Studies, is based on fanciful assumptions. comply with fiscal rules requiring the debt to decline as a proportion of the economy within five years.

In the autumn statement, Jeremy Hunt failed to address several major pressures on the public finances, while leaving billions of pounds of tax and spending promised by the Tories off the official record of government policy.

At the top of the list are the £20 billion in public spending cuts planned after the general election, representing a tougher austerity drive than George Osborne’s burn-and-burn program. Few economists think this would be wise when hospitals, schools and the wider public sector are on their knees.

Next is fuel duty, which is set to rise by 8p per liter from the end of March, costing motorists around £6bn a year. Frozen since 2011, and on the eve of elections, there is no chance of this happening: Hunt hinted. But official forecasts predict a quantum leap, providing almost half of the chancellor’s £13 billion of leeway to oppose his fiscal rules.

Elsewhere, Sunak promised to increase defense spending from 2% of GDP to 2.5% in the long term, without saying how the numbers add up. It would cost more than £16 billion a year by the end of the 2020s. Could this be removed from the Tory manifesto without an almighty row? Don’t bet on it.

The same goes for a “temporary” reduction in foreign aid from 0.7% of GDP to 0.5%. A decision by Sunak during the Covid pandemic, which threatened to tear the Tories apart. Hunt, as a backbencher, voted against the government on this issue. Today, as chancellor, he estimates that the cost of reinstating this policy is £6 billion. this won’t happen in five years. But conservatives still have a policy of pretending that day will come.

Making drastic tax cuts the centerpiece of his election campaign would almost certainly mean Sunak would rely on a program of deeper public spending cuts than already planned, unless debt levels are even higher . This is a reality that Sunak is increasingly comfortable with in right-wing circles. But so far he has faced too few tough questions about the reality of his plans.

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Like Truss and Kwarteng before him, Sunak could argue that tax cuts help the economy grow and generate more revenue in the future. Even if some targeted measures could be useful in the short term, this is clearly not its primary objective: winning votes is the yardstick, not economic progress.

In the meantime, the danger is that the short-term benefits of tax cuts will be outweighed by the lasting damage caused by further attacks on the state. It is clear that record NHS waiting lists, crumbling schools, poverty and poor health are holding back Britain’s economic potential. And as a growing number of economists recognize, increased public investment can help “pull in” the private sector, which then provides a more effective path to prosperity.

Taxation may be a barrier to growth, but the biggest problem facing the UK economy is its lack of investment – ​​a consequence of austerity and moderate levels of business investment after Brexit and years of Tory flip-flopping and psychodrama at Westminster.

Economists see investment as essential to supporting productivity growth, which would be very beneficial to the public purse. However, failure would come at a significant cost.

According to the Office for Budget Responsibility, returning productivity growth to pre-2008 levels would reduce government borrowing by £46 billion a year in 2028-29, while returning growth to levels seen in over the last 15 years would increase them by around £46 billion a year. £40 billion.

Investment of the type promoted by Labor is not the radical and dangerous economic plan it claims to be. Bribing voters on their tax bills while being dishonest about the consequences should prove more difficult.

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