Public spending will soar to 1970s levels under Tory and Labour election plans - think tank

Posted On: 
4th November 2019

Government spending is likely to return to levels not seen since the 1970s regardless of whether the Conservatives or Labour win the general election, a leading think tank has said.

The two parties have signed up to a raft of big spending pledges.
Credit: 
PA

New research by the Resolution Foundation found that both parties are set to usher in "a new era for the public finances" with a raft of big-ticket spending promises that will have to require tax rises.

Analysis of the party's existing pledges predicts that public spending will rise to 41.3% of gross domestic product (GDP) by 2023-24 under the Tories.

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That figure is "higher than in any pre-crisis year since 1984-85", the think tank says, and comes in just slightly under the 42% recorded between 1966-67 and 1984-85.

Meanwhile the Resolution Foundation predicts that Labour's plans would take public spending to 43.3% of GDP - a figure that would "easily surpass the 1970s average".

Labour's spending would also be "higher than any pre-crisis year since 1982-83", the think tank says, with spending as a share of GDP only higher in eight years since the Second World War.

"Ahead of the publication of the election manifestos these scenarios are no more than speculative," the report says.

"But they reflect the rhetoric delivered by the two biggest parties and should therefore provide some indication of the direction of travel on spending. 

"What’s noticeable is that, under either approach, expenditure ends up much closer to the average recorded in the 1960s and 1970s than to the average of the 1980s and 1990s."

Matt Whittaker, deputy chief executive of the Resolution Foundation, said: "After an unprecedented decade of austerity, both main parties are gearing up to turn the spending taps back on.

"Whichever party wins is going to face huge questions about how they are going to pay for Britain's growing state. The fact is that whatever promises are made over the course of this election campaign, taxes are going to have to rise over the coming decade."

The analysis comes ahead of this week's expected launch of the Conservatives' election campaign - and as the two main parties trade blows over low pay.

The Tories have already promised to boost NHS spending, hire more police officers and end the five-year freeze on working age benefits.

Meanwhile Labour this weekend outlined plans to improve the heating and insulation of every home in the country - a move that the party said would require a £60bn public subsidy - and has committed to bringing back free TV licenses for the over-75s.

Sajid Javid on Monday backed a Treasury-commissioned report which said the National Living Wage should be boosted to two-thirds of the average wage.

The Chancellor said: "The evidence is clear that our approach is the right one. We will end low pay by putting the National Living Wage on a path to increase to £10.50 over the next five years."

But Labour's John McDonnell dismissed the review by Arindrajit Dube, economics professor at the University of Massachusetts, as "an insult to our hard working people".

"It's a derisory offer which people will have to wait years for," the opposition frontbencher said.

"Labour will immediately introduce a real living wage of £10 an hour for everyone 16 and over, outstripping every publicity stunt figure the Tories invent."