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The next British government will inherit an economic disaster. After the July 4 general election, political leaders must somehow grapple with the country’s complicated trifecta: slow growth, tight finances and underfunded public services. This will guarantee bold economic management.
But the British electorate is tired. The long Brexit process, the cost of living crisis and the September 2022 “mini” budget fiasco have made the idea of disruptive reforms and higher taxes to support hospitals, schools and courts unpalatable to households and businesses . The manifesto presented by Rishi Sunak’s conservative party this week it’s not realistic. Sir Keir Starmer’s Labor program is more crediblebut harassed by caution.
The Conservative platform is a series of provisional measures rather than a clear statement of intentions for the next five years. The centerpiece is a £17 billion package in tax cuts. This includes a plan to cut national insurance and raise the threshold for taxing childcare benefits, which would support labor force participation. The promise to permanently reduce stamp duty for first-time buyers may boost home ownership but risks driving up house prices if ambitious housebuilding targets are not met. Elsewhere there are important commitments to apprenticeships, skills transfer and clean technologies, although without the coherent national or regional growth strategy that Britain needs.
Sunak’s plan to repay his promises with cuts to the welfare bill, a crackdown on tax evasion and various savings in the civil service is a serious stretch. The manifesto commits to increasing defense spending, but does not address the reality of overstretched public services, which will require greater spending.
Labour’s manifesto offers a sharper, if not wildly ambitious, vision of the economy. He promise of stability as a foundation for growth and wealth creation will be welcomed by businesses and could unlock some stalled investment plans. Its long-term infrastructure strategy, backed by a review of planning rules, is promising, although it will take time to bear fruit. British productivity has been hampered by short-term policymaking and a failure to build roads, railways and housing. The recognition that extra money for the NHS and education will also require a change in the way it works shows pragmatism.
But there are also concerns about Starmer’s plans. The promise not to increase corporation tax, VAT or national insurance – arising from a determination to show that this is not the reckless tax-and-spend Labor Party of yesteryear – risks locking the party into unrealistic spending plans for public services. It complicates much-needed efforts to simplify and reform Britain’s tax system, which could boost growth.
It also means Labor may be forced to resort to wealth taxes in the future. Starmer’s goal of raising £8.6bn through carefully targeted tax rises includes a higher tax on private equity bosses, which risks damaging the UK’s competitiveness. Although labor manifesto Furthermore, it does not mention the capital gains tax, future changes are not ruled out. Fair burden sharing is important to revitalizing the UK economy, but not at the cost of driving away wealth.
At this point in the campaign, Rishi Sunak has not been able to dissociate his supposed future government from the chaotic Conservative administrations of recent years. Labour’s desire not to chip away at its 20-point lead in the polls has led the party, meanwhile, to focus on convincing voters and markets that it is fiscally responsible. If he comes to power, he will have to quickly demonstrate that he can achieve the “change” he has adopted as his one-word slogan. It is important to end a decade of uncertainty and instability. But this alone will not be enough.