The BBC’s excellent Stephanie Flanders has blogged about our new document, which reveals the £22 billion credibility gap at the heart of Tory economic policy. Our document, is here -
I’m a huge fan of Stephanie’s work but there are a few points where I think she’s got the wrong end of the stick.
To kick off with National Insurance. Stephanie says that we have costed the Conservatives’ NICs policy “as if they were reversing all of next year’s rise”.
This isn’t right. The document we published today presents an HM Treasury costing of the precise Conservative policy, calculated following the Conservative announcement and cited in Parliament by me on Wednesday. This is specifically, as I told Parliament this week, a costing of the Conservative proposal for increased NICs thresholds, not a costing of the reversal of Labour’s policy.
“Even the shadow Chancellor has said that that will cost £5.6 billion, but the Treasury has now costed those increases in national insurance thresholds at £6 billion in 2011-12, £6.3 billion in 2012-13 and 2013-14, and £6.7 billion in 2014-15.” Liam Byrne, Hansard, 30 March 2010, column 738
Stephanie questions whether the Tory policy to bring back the dividend tax credit is actually party policy, saying that George Osborne’s office told her that he wants to bring back the dividend tax credit, but have said that it could take “more than one parliament”.
The fact is that the Tories are campaigning on this issue – for example, they put it in their posters this week. They say it is a problem they want to solve, and David Cameron has included it as an issue they wish to address over a Parliament.
If they are ruling our any move here for the rest of the next Parliament then we will accept that – but they need to then stop suggesting to the British people that they are making a promise on this issue. Whether they do this by abolishing stamp duty on shares or by some other measure, they don’t seem to disagree that there is a pricetag of around £5bn.
On reducing taxes on savings, Stephanie suggests that Tory promises made at the time of a Budget aren’t actually “Tory policy”. Sorry, Stephanie! What we say at a Budget is Labour policy, and what the Tories say at a Budget is Tory policy! These were their policies – and they campaigned on them. When it was pointed out that they had no money to pay for them, then they suddenly started talking about them being “budget submissions”.
Now we come to marriage tax. Stephanie says that the Tories haven’t committed to spending £5 billion on “recognising marriage”. The truth is that they have been promising these tax breaks for five years and never once come to a firm proposals. But what we do know is:
o The only proposal that’s come from an official Conservative Party policy review is of a transferable tax allowance
o David Cameron has said that it would apply to all married couples
o The costing is for the final year of a Parliament, so that even if it was implemented in a staged way, the full tax break would be in
operation by that year.
Now you could “recognise” marriage in the tax system for almost nothing – like taking VAT off confetti or wedding cake! But the Conservatives have told the British people that this is a substantive pledge. If they are today downgrading their pledge officially to less than a billion pounds, we will happily update the document. Mind you, they would still have to set out how it would be funded though – and they have got nowhere near doing that at all.
On efficiency savings, Stephanie says that the Tories are promising to cut departmental spending in line with the savings and says that makes them ‘real’, even if they are not as painless as they suggest.
Of course the Conservatives could simply cut budgets by £6bn indiscriminately. But that is not what they have said publicly. If they are now saying that they will make £6bn in cuts rather than vague efficiency savings, then they should tell people where those cuts would fall. We’ve been clear about where we will find the £35 billion of efficiency savings over the next year – the Tories haven’t given us any details of where they’d find the extra £12 billion of savings they think they can find in a matter of weeks.
On council tax, we think Stephanie has made an error. She describes our costing of the Conservatives’ council tax freeze as a mistake saying that the Institute for Fiscal Studies don’t agree with us. But they do! The Treasury has costed their policy at £1.4 billion, and the IFS says that this is correct, when the Barnett Formula us taken into account:
“Under the infamous ‘Barnett formula’, a £1.3 billion increase in grants to English local authorities would be matched by a £0.3 billion increase in grants to the devolved administrations in Wales, Scotland and Northern Ireland. This increases our estimate of the total net cost of the policy to £1.4 billion after rounding – and would presumably increase the Treasury’s estimate of the cost to roughly the same level if they were to net off the council tax benefit savings too.”
Institute for Fiscal Studies, “The Conservative Party’s Council Tax Freeze”, March 2010,
Elsewhere in the same IFS document, they say: “Labour rightly say that this pledge costs £1.4 billion (if we consider the pledge in isolation from the planned reductions in advertising and consultancy spending)”.
It’s worth stating that the document we published today does not consider the pledge in isolation from the planned reductions in advertising and consultancy spending. These are presented on p. 90 of the document. Our document considers tax, spending and savings pledges separately, but the final figure we present is net of all of these.
Now a few points which might only be of interest to politics geeks – but which we think are worth setting straight.
Stephanie also asks why we haven’t mentioned the Tory promise to reverse the On 50p rate of income tax, and why we haven’t classed it among our “Tory broken promises”. Well, the truth is that we thought we’d bend over backwards to be fair to the Tories on this one. Following the publication of our analysis in January, the Conservatives conceded they won’t commit to reverse the Government’s position on 50p rate of tax and pension relief reform. Even though they gave the strong impression at the time – through nods and winks – that they would reverse it, we’ve given the benefit of the doubt and taken it out, so it doesn’t appear in the document we launched today at all.
On the Tories’ broken promise on providing 45,000 new single rooms in the NHS. Stephanie suggests that the Tories “stepped away” from their 45,000 single rooms. That’s not actually correct -
Stephanie says that the Conservatives had “arguably” stepped away from their promise of 45,000 single rooms before the first dossier came out. This is not true. The first Labour dossier and the Conservatives’ draft health manifesto were published on the same day. The Conservatives’ health manifesto represented the first time they had publicly backed down from their previous firm promise to build 45,000 new NHS single rooms. They had not “stepped away from it before the first dossier came out” – in fact, the dossier was published a few hours before the draft manifesto. Their policy of building 45,000 new single rooms was still on their website until later that week.
Similarly, with maternity nurses. Stephanie suggests that our dossier today provides “no documented evidence for a [Tory] pledge to spend £492m a year on providing maternity nurses for all”. In fact it does. The dossier includes quotes from shadow children’s minister Maria Miller, saying “we are also committed to introducing our version of the Dutch kraamzorg system” in a speech to Conservative Party Conference, 30 September 2008, and the shadow children, schools and families secretary Michael Gove talking about “implementing a version of the Dutch kraamzorg or state maternity nurse system” in a speech to Barnardo’s, 9 March 2009. This goes further than Conservative officials saying that they will just “look at” the system in Holland!
Do take a look at our document – here -
Stephanie’s blog is here -
Liam is the MP for Birmingham Hodge Hill, and Labour's Shadow Chief Secretary. 
