Do Jeremy Corbyn's 'money tree' election promises actually stand up to scrutiny?

Election 2017: Jeremy Corbyn's 'costed manifesto' claim examined

Labour's 'costed manifesto' - what does this mean?

Wednesday, May 31, 2017

When all the other Tory bullets had bounced off Jeremy Corbyn, it was the only line they had left.

The Labour leader's policies, they said, were pulled from a money tree. His expansive manifesto was rooted in fantasy, rather than reality. The sums didn't add up.

The line was parroted by all the leading Tory players as the election campaign reached its climax. But, like all the other punches the Tories had aimed at Corbyn throughout the campaign, it failed to land. Labour performed superbly and Theresa May is now mired in crisis, her opposite number ideally placed for a tilt at Number 10.

But the nagging doubt remains: can Corbyn fulfil all those lavish promises he made in his manifesto? The National Education Service, the new school buildings, the extension of free childcare, the abolition of tuition fees - could Labour actually pay for all of this by ramping up corporation tax to 26%, and hammering the top 2% on income tax?

It's a vital question, because Corbyn's electoral success, his resonance with young voters, was predicated on these promises. If they are nothing more than empty promises, back-of-a-fag-packet ideas which can't be turned into reality, the public have every right to know.

Labour were certainly bullish whenever the question was put to them in the manifesto. The Labour manifesto, they kept saying, was fully costed. Every time one of Labour's policies was questioned, the leadership team said the numbers have been well and truly crunched - unlike the Tories, who came under fire for not costing any of their flagship polices.

Which is all well and good - but how did Labour cost its manifesto? Did it hire external experts, or simply let Corbyn loyalists mark their own homework?

Helen Miller, associate director of the Institute for Fiscal Studies (IFS) and head of its tax sector, explains that each party has the choice, and the obligation, to cost its own manifesto, although independent organisations like the IFS do their own analysis as a public service.

Miller told us: “It’s definitely a choice of the party – they’re not obliged to do costings. The Labour Party, and other parties, cost their own manifestos. We then undertake analysis of the manifesto and check out the numbers.”

When one delves deeper, the list of experts sourced by Labour during the manifesto planning process appears extremely thorough.

The party produced an explanatory document, Funding Britain's Future, which can be seen here. The document culminated in an extensive footnotes section, containing links to the various claims and estimates made in the manifesto.

The sources were a mixture of public bodies such as HMRC, the National Audit Office and Office for Budget Responsibility; thinktanks such as the King's Fund and Joseph Rowntree Foundation; individual experts, such as the London-based venture capitalist Avinash Persaud; reports from newspapers such as the Daily Mirror and even Private Eye.

The list of references certainly isn't bullet-proof. One footnote even admitted "we have allowed for a degree of uncertainty". And it wasn't clear which person or team within the Labour party was responsible for collating all the data. Expert advice is only valuable if it is processed fairly, free of bias or agenda. 

Despite these quibbles, one has to conclude that Labour's research was extremely thorough - far better than that of the Tories, who appeared to believe they could simply wing it because the man in the opposite corner was so useless.

But this doesn't mean the policies would actually work. That's a different question altogether. And the view of the experts appears mixed, to say the least.

The IFS, acting in its role as independent watchdog, certainly offered a heavily critical response, suggesting the tax revenue forecasts, the financial bedrock of Labour's spending plans, were on the worryingly high side. Corbyn's corporation tax plan, which would see the rate raised by 7% (in contrast to the Tories, who want to cut it from 19% to 17%), received particular criticism.

Speaking before the election, Miller said: "We're concerned Labour won't raise as much in tax as they want to raise. They should build in more headroom. We also pointed out there's risk in some of their policy. Corporation tax is an example... higher corporation taxes lead to lower investment down the line."

The IFS has also expressed concern about the income tax pledge. Associate director Robert Joyce, who wrote a briefing note on the subject, said "many would take action to reduce their taxable income in response: for example by increasing contributions to private pensions. Because the extent of those kinds of responses is very uncertain, the amount of extra revenue these higher tax rates would raise is also very uncertain.

"Labour’s policy could raise something like the £4.5 billion per year it expects, but it could also raise nothing. What is certain is that the proposal would miss an opportunity to sort out the complex mess that recent governments have made of the tax system for those with the highest incomes."

Concerns have also been echoed elsewhere, notably by the Adam Smith Institute, which says in a report on its website that while Labour's corporation tax plan "looks about right," the problem "is that the economy and business do not remain static while politicians fiddle with the tax rates.  People and companies react to changes; and the bigger the change is, the more they react."

The report adds that "a 9% increase in tax rates therefore is highly unlikely to raise nine times as much as a 1% increase". In fact the thinktank suggests the Tories' proposed 17% rate might actually bring in more revenue than its Labour equivalent, because lower tax rates would encourage companies to move to or start up in the UK.

One must point out that the economists are far from unanimous in their view on Corbyn's flagship revenue-raising plan. Tax blogger Richard Murphy, for instance, writes that Corbyn is right to increase corporation tax. Full Fact, an independent fact-checking group which has supplied regular articles for talkRADIO, has produced an analysis piece suggesting that Tory claims about Labour's income tax plans are "incorrect" while pointing out that the vast majority of people would be unaffected by the changes.

Nonetheless, Corbyn's revenue-raising policies, the cornerstone of his manifesto, remain shrouded in uncertainty. While the economists are saying many things, none but the most left-wing of them are giving Corbynonomics their unequivocal backing. 

During the election campaign the Tories attacked Corbyn for his alleged apologies for terror, his perceived inability to negotiate Brexit and the faux pas of his shadow home secretary. Perhaps they should have rammed home the 'money tree' line earlier. Because if Labour do eventually claim power, Corbyn's regime will hinge on whether he can balance the books.