by Callum Anderson
Just a few weeks remain of the 2010-2015 UK Parliament. On Wednesday, the coalition government rolls its dice one last time, in an attempt to woo undecided voters.
Meanwhile last weekend, Ed Miliband unveiled Labour’s election pledge card at Birmingham’s ICC. The first two pledges – building a strong economic foundation and raising the higher living standards for working families – have sought to serve as indicators of Labour’s simultaneous commitments to fiscal prudence and growing the economy.
Indeed, it is the economy that will decide this election, with Mr Miliband’s Labour set to ask the electorate that famous question: “are you better off than you were five years ago?”
Whilst much of the scrutiny has rightly been reserved for the main three Westminster parties, it is the economic policies of the two most significant ‘insurgent’ parties – UKIP and the Green Party – that serve as the most unknown factor of the election.
So, where do UKIP and the Greens stand on economic policy?
Traditionally, UKIP has positioned itself as a libertarian party. However over the last year, in pursuit of widening its appeal, the party has drifted leftwards on economics, if not in social affairs. The UKIP of 2010 offering a flat income tax is a distant memory. But the result has been the same: economic illiteracy.
For 2015, it has pledged to increase personal allowance to the level of full-time minimum wage earnings, while simultaneously effectively cutting income tax for higher rate payers to 35p from 40p between £42,285 and £55,000, whereupon the 40p rate would then become payable.
Furthermore, it would abolish inheritance tax – a move that would not only protect the richest estates in the UK, but also cost the Exchequer almost £3.5 billion a year.
To close this gap, UKIP pledged to cut a number of government departments, as well as UKIP staple claims – leaving the European Union (EU) would save £8 billion in net contributions and slashing foreign aid by £9 billion.
However, it does in no way account for a number of things. First, the Office for Budget Responsibility revealed late last year that Britain’s budget deficit would be £48 billion larger than forecast when the coalition took power as less income tax than expected flowed into Treasury coffers because of wage stagnation, as well as National Insurance contributions also being £7.4 billion below forecast.
Equally, the Institute for Public Policy Research (IPPR) stated that increasing the personal tax-free allowance to £11,000 – that is approximately £2,000 less than suggested by UKIP – would cost the UK taxpayer over £2 billion. Clearly, these two factors combined would result in a dramatic reduction in revenue collected by the UK government. Thus, significant (and, as of now, undetermined) swingeing cuts in public services would be necessary to fund this.
Second, there is the lack of credibility in the apparent ease with which a UK that has abruptly left the EU in negotiating a trade agreement with those very same countries. Indeed, it is nigh on impossible to imagine how, say, a government led by David Cameron and backed by Nigel Farage’s UKIP would be able to curry any amount of goodwill among our European neighbours to the extent that Britain would be granted a favourable trading relationship with them.
And that is not to mention the other substantial drawbacks Britain would suffer from – reduction in foreign direct investment, hundreds of thousands of jobs at risk to name just two – as I’ve described, in detail, here.
Then there is the Green party manifesto – equally conveying economic illiteracy.
Much has been made of its Wealth Tax, which it would levy on individuals worth more than £3 million. As was painfully highlighted by Andrew Neil a couple of months ago on ‘Sunday Politics’, as well as by Tom Papworth, Associate Director for Economic Policy at CentreForum, the policy is pure economic folly.
Indeed, French President François Hollande’s wealth tax, which kicks in at £800,000 (so, much lower than the Green’s £3 million) raises under €4 billion a year. Yet, the Greens say that they would be able to raise up to £40 billion.
Economic policy-making at its wackiest (and most dangerous).
Then there is their well loved ‘Citizens Income’ that would cover an individual’s basic needs will be introduced, which will replace tax-free allowances and most social security benefits. However, when challenged on this point, Green Party leader Natalie Bennett has been consistently unable to provide a proper (read: sensible) answer as to how this would be paid for.
Britain deserves better than this.
But, herein lies a distinct opportunity for Labour.
While the Conservatives veer rightwards in search of UKIP voters, UKIP flips and flops over whether to economically left or right, the Greens maintain their position in economic fantasy land and the Liberal Democrats merely avoid decimation, it is essential that Labour presents an alternative economic vision that seeks to strengthen the public finances and grow the UK economy.
Indeed, in the run up to May 8th, the entire shadow treasury and business team must espouse the virtues of prudence and investment for the long-term.
Because there is one thing that Britain cannot afford: the voodoo economics.
Callum Anderson works at a national charity