Faisal Islam: Voters are being taken for fools on the economy

Both main parties’ manifestos are less about detailed economic plans for office, but instead are broad marketing narratives aimed to serve the relevant central message.

How does Keir Starmer square not putting up the main rates of tax, investing in the future, not borrowing more and “never returning to austerity” in spending on public services?

The answer in the Labour manifesto is by getting the economy to grow faster with a plan to slash red tape on building homes and infrastructure.

Many recent administrations have claimed this magic elixir will prevent the need for tough choices on tax and spend.

Labour’s manifesto retains a Green Prosperity Plan for funding green steel, electric vehicles and clean energy, but this is significantly pared back from its original plan to pump tens of billions of pounds of borrowed money into green investment.

Elsewhere, such moves have indeed helped boost economic growth. But the scale of Labour’s moves are very modest compared to, for example, President Biden’s plans in the US.

Even under their most optimistic timetable, the impact of such changes would take several months, probably years.

In recent days, Labour figures have started to talk publicly about lowering the trade barriers with Europe created by the Brexit deal. That they are talking about Brexit is a sign of confidence, but also a reality that some business voices are pressing Labour to embrace a way to increase productivity that doesn’t require taxpayer funds.

What happens to Labour’s strategy if growth disappoints? It is a reasonable question given anaemic UK growth. The Labour frontbench have suggested variations of “I’m optimistic”, and “it just will”.

By autumn, there will be severe pressure on some types of spending and even on the rules Labour has decided to adhere to for borrowing. Although it was a modest manifesto in terms of the overall size of the policies, its commitments on tax and borrowing are, at the moment, a significant straitjacket on the actions of a possible Labour government.

For the Conservatives, the general narrative is that they do believe the state can now shrink from emergency pandemic and energy crisis levels. Fewer civil servants are required, they say, and the increase in working-age benefits can stop, now we are back to normal. Spending less on these things (while keeping the already planned £11bn a year increase from the income tax fiscal drag generated by those frozen tax thresholds) can free up space for slightly lowering other taxes, such as the rate of National Insurance.

This is a rather uncertain accounting basis for permanent tax cuts, but not impossible to deliver in very general terms. But there is no set of policies here that would be scored by the independent Office for Budget Responsibility (OBR) as raising £12bn. It is unclear which area of spending would lose support in order to provide the funding for the more certain impact of National Insurance cuts. If, for example, the rise in working-age disability is not a blip, then there could be austerity-style cuts in some government departments, such as those covering courts and councils.