‘Andrew Neil: You would borrow more, wouldn’t you?
Andrew Neil: To bridge the deficit you have to borrow more. You’re going to borrow £30 billion a year simply to pay for public investment. That’s part of what you’re going to do – correct?
Lucy Powell: We are going to balance the books by the current expenditure by end of the Parliament.
Andrew Neil: And borrow £30 billion a year for public investment
Lucy Powell: We may we may use some investment borrowing for much-needed investment but not for day-to-day spending’ So Labour would not balance the books; the debt would rise ever-upwards. She was so annoyed at the beginning because she was asked what taxes Labour would introduce do to cut the deficit — and she started waffling about how Labour would magically increase people’s pay and cut the deficit that way. But she then went further than any other Labour figure in admitting that the 50p tax is the only one that would go towards deficit reduction (as opposed to funding extra spending project). The killer quote is that the 50p
‘That’s the only tax that we have set out that will be increasing. But we are very clear that what we can do is increase the tax base.’
Two points here.
1. If the 50p tax is Labour’s only tax to cut the deficit, how much will it raise? Even by Labour estimates that will raise just £3 billion. In reality, it’ll be closer to zero. Here’s the Institute of Fiscal Studies:
‘the best evidence we have still suggests that raising the top rate of tax would raise little revenue and make, at best, a marginal contribution to reducing the budget deficit an incoming government would face after the next election.’
Yet this negligible contribution from a populist 50p tax appears to be Labour’s deficit reduction programme in its entirety. That is to say: the Labour Party has no deficit reduction strategy. This now stands exposed.
2. Given that employment is at a record high, how can Labour claim it will ‘increase the tax base’? God knows that the UK economy has its problems, but lack of workers (or the ‘tax base’ as she calls it) is not one of them. Increasing the tax base ‘has not happened under the Tories’, she said. I beg to differ. The number of people working and paying tax has grown more under the Cameron than any recent Prime Minister. The tax revenue has not followed so quickly because the George Osborne has actively supported this jobs miracle with tax cuts and tax credits for the low-paid. Does Labour intend to stop this support, in hope of clawing more from ‘the tax base’? If so, we should be told.
Bottom line: Labour — a party with a 50/50 chance of running Britain on 8 May — has no plans to tackle the deficit. Sooner or later, the bond markets may start to take notice.