Talk to the hand, Nicola, because the face ain't listening. Photo:Getty
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SNP manifesto 2015: Less of a ransom note, more of a blank cheque

The SNP's manifesto, far from a ransom note, is easily reconciliable with Labour's fiscal plans. The bigger fear is that none of the parties are planning for what happens if the economy takes a turn for the worse.

Nicola Sturgeon launched the SNP’s manifesto yesterday with a plan to end austerity, and provide an alternative to the cuts proposed by the Conservatives and Labour. The SNP says it is “the only party offering an alternative to the Westminster cuts agenda”. It wants spending by Government departments to increase by 0.5% above inflation every year after 2015-16.

Former Conservative Prime Minister John Major will warn in a speech today of the “mayhem” which could result from a Labour government reliant on the SNP in the next Parliament, including the risk that the SNP will push Labour into more spending and more borrowing.

Setting the scare mongering to one side for a moment: could Labour accommodate the SNP’s demands and still meet its own manifesto pledge for securing the public finances?  The SNP proposal to increase departmental spending by 0.5% a year would mean current departmental spending going up by around £1.7 billion a year. This would leave departmental spending around £7 billion higher a year in real terms by 2020, compared to the first year of the new Parliament.

However, tax revenues are forecast to rise by around £20 billion to £23 billion a year over the course of the next Parliament. This means that the next Government can raise departmental spending and still eliminate the current deficit (Labour’s target, which excludes investment spending) by 2020 – just. The deficit would also be falling in every year.

Admittedly, Labour would not be able to meet the mandate in the Budget Responsibility Charter, that it voted for earlier in the year. That requires the Government to be on track for the current deficit to be eliminated by the end of a three year period. Currently, that’s 2018-19. But because it’s a rolling timetable, it allows for the flexibility to change the timing of the deficit reduction programme.  And Labour makes no reference to it in its manifesto, suggesting it does not see the Charter as its primary target.

Labour has already left itself considerable room on its deficit reduction plans: because it is targeting the current deficit, that is, excluding borrowing for investment, by 2020, it could have around £30 billion extra in annual spending to play with compared to the Conservatives. It also looks like it has enough room to accommodate the SNP. There is also remarkable agreement between the two on ways of raising money to pay for extra pledges – the mansion tax, the 50p rate of income tax and the bank bonus tax make an appearance in both manifestos.

In fact, the real risk is not so much that the SNP drags a Labour government in to more spending; Labour may be pretty much already there. The bigger risk is that all parties are making plans based on a very uncertain five year forecast.

The tax revenue figures in the OBR report rely on GDP growing by 2.3% to 2.6% a year. The IMF is less sanguine, expecting UK growth to plateau at around 2.1% a year by the end of the decade. Even that forecast implies that the UK’s dismal productivity performance will pick up substantially in the next five years. Previous OBR scenario analysis shows that deficit forecasts could be out by tens of billions if productivity does not pick up, as set out in the Social Market Foundation’s A Deficit of Growth. On current plans, that would leave the Conservatives unable to meet their target too. The gamble on tax revenues to fix the public finances is one that all parties are making.

 

Nida Broughton is Senior Economist at the Social Market Foundation.

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Theresa May is paying the price for mismanaging Boris Johnson

The Foreign Secretary's bruised ego may end up destroying Theresa May. 

And to think that Theresa May scheduled her big speech for this Friday to make sure that Conservative party conference wouldn’t be dominated by the matter of Brexit. Now, thanks to Boris Johnson, it won’t just be her conference, but Labour’s, which is overshadowed by Brexit in general and Tory in-fighting in particular. (One imagines that the Labour leadership will find a way to cope somehow.)

May is paying the price for mismanaging Johnson during her period of political hegemony after she became leader. After he was betrayed by Michael Gove and lacking any particular faction in the parliamentary party, she brought him back from the brink of political death by making him Foreign Secretary, but also used her strength and his weakness to shrink his empire.

The Foreign Office had its responsibility for negotiating Brexit hived off to the newly-created Department for Exiting the European Union (Dexeu) and for navigating post-Brexit trade deals to the Department of International Trade. Johnson was given control of one of the great offices of state, but with no responsibility at all for the greatest foreign policy challenge since the Second World War.

Adding to his discomfort, the new Foreign Secretary was regularly the subject of jokes from the Prime Minister and cabinet colleagues. May likened him to a dog that had to be put down. Philip Hammond quipped about him during his joke-fuelled 2017 Budget. All of which gave Johnson’s allies the impression that Johnson-hunting was a licensed sport as far as Downing Street was concerned. He was then shut out of the election campaign and has continued to be a marginalised figure even as the disappointing election result forced May to involve the wider cabinet in policymaking.

His sense of exclusion from the discussions around May’s Florence speech only added to his sense of isolation. May forgot that if you aren’t going to kill, don’t wound: now, thanks to her lost majority, she can’t afford to put any of the Brexiteers out in the cold, and Johnson is once again where he wants to be: centre-stage. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to domestic and global politics.