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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Who will win in Stoke-on-Trent?

Labour are the favourites, but they could fall victim to a shock in the Midlands constituency.  

The resignation of Tristram Hunt as MP for Stoke-on-Central has triggered a by-election in the safe Labour seat of Stoke on Trent Central. That had Westminster speculating about the possibility of a victory for Ukip, which only intensified once Paul Nuttall, the party’s leader, was installed as the candidate.

If Nuttall’s message that the Labour Party has lost touch with its small-town and post-industrial heartlands is going to pay dividends at the ballot box, there can hardly be a better set of circumstances than this: the sitting MP has quit to take up a well-paid job in London, and although  the overwhelming majority of Labour MPs voted to block Brexit, the well-advertised divisions in that party over the vote should help Ukip.

But Labour started with a solid lead – it is always more useful to talk about percentages, not raw vote totals – of 16 points in 2015, with the two parties of the right effectively tied in second and third place. Just 33 votes separated Ukip in second from the third-placed Conservatives.

There was a possible – but narrow – path to victory for Ukip that involved swallowing up the Conservative vote, while Labour shed votes in three directions: to the Liberal Democrats, to Ukip, and to abstention.

But as I wrote at the start of the contest, Ukip were, in my view, overwritten in their chances of winning the seat. We talk a lot about Labour’s problem appealing to “aspirational” voters in Westminster, but less covered, and equally important, is Ukip’s aspiration problem.

For some people, a vote for Ukip is effectively a declaration that you live in a dump. You can have an interesting debate about whether it was particularly sympathetic of Ken Clarke to brand that party’s voters as “elderly male people who have had disappointing lives”, but that view is not just confined to pro-European Conservatives. A great number of people, in Stoke and elsewhere, who are sympathetic to Ukip’s positions on immigration, international development and the European Union also think that voting Ukip is for losers.

That always made making inroads into the Conservative vote harder than it looks. At the risk of looking very, very foolish in six days time, I found it difficult to imagine why Tory voters in Hanley would take the risk of voting Ukip. As I wrote when Nuttall announced his candidacy, the Conservatives were, in my view, a bigger threat to Labour than Ukip.

Under Theresa May, almost every move the party has made has been designed around making inroads into the Ukip vote and that part of the Labour vote that is sympathetic to Ukip. If the polls are to be believed, she’s succeeding nationally, though even on current polling, the Conservatives wouldn’t have enough to take Stoke on Trent Central.

Now Theresa May has made a visit to the constituency. Well, seeing as the government has a comfortable majority in the House of Commons, it’s not as if the Prime Minister needs to find time to visit the seat, particularly when there is another, easier battle down the road in the shape of the West Midlands mayoral election.

But one thing is certain: the Conservatives wouldn’t be sending May down if they thought that they were going to do worse than they did in 2015.

Parties can be wrong of course. The Conservatives knew that they had found a vulnerable spot in the last election as far as a Labour deal with the SNP was concerned. They thought that vulnerable spot was worth 15 to 20 seats. They gained 27 from the Liberal Democrats and a further eight from Labour.  Labour knew they would underperform public expectations and thought they’d end up with around 260 to 280 seats. They ended up with 232.

Nevertheless, Theresa May wouldn’t be coming down to Stoke if CCHQ thought that four days later, her party was going to finish fourth. And if the Conservatives don’t collapse, anyone betting on Ukip is liable to lose their shirt. 

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