November 12, 2019
New research reveals that Labour’s reckless spending plans could hand an additional £2,400 bill to every taxpayer every year if Jeremy Corbyn becomes Prime Minister. This figure - the ‘Cost of Corbyn’ - is equivalent to an entire month’s pay for the average earner.
Jeremy Corbyn’s Labour would wrack up a spending bill of an extra £1.2 trillion over the next Parliament. This includes £546 billion of capital expenditure – which their Fiscal Rule would allow them to borrow for. The remaining resource spending of £651 billion would need to be funded through tax measures.
Analysis of Labour’s spending plans shows that there is a £374 billion black hole in their numbers – with only £277 billion of their £651 billion of resource spending covered by taxes under their current plans. Labour will have to put up taxes to cover the shortfall.
Commenting, Chancellor of the Exchequer Sajid Javid said:
“Jeremy Corbyn is planning a reckless spending spree which we will all have to pay for. He will open up a huge black hole in the nation’s finances and hard working people will be the ones that suffer. In order to pay for his policies, he will not only have to massively increase borrowing and debt, he will also need to hike up taxes by £2,400 per person – this is equivalent to an entire month’s pay for the average earner.
“The British people have made huge progress over the last decade in repairing the damage left to us by the last Labour Government. If Jeremy Corbyn gets into power he would throw all that hard work away.
“A vote for Corbyn’s Labour is a vote for higher taxes and the chaos of two more referendums. Only a sensible, majority Conservative Government will get Brexit done and provide the economic certainty that families and businesses need to plan for the future. We simply cannot afford the cost of Corbyn.”
‘Labour’s Fiscal Credibility Rule does not allow for borrowing for day to day spending. Under our rule, drafted by leading economists, only borrowing for long term investment is allowed.’ (John McDonnell, Twitter, 6 January 2019, link)
By their own fiscal rules, Labour are not allowed to borrow to fund the £650 billion of day-to-day spending commitments they have made, and would instead need to raise taxes. They have committed to £277 billion in revenue raisers, meaning they have a gap to fill of £374 billion. There are 31,199,000 income taxpayers in the UK, who would each need to pay an extra £12,000 over five years, or £2,400 a year, to cover Labour’s this gap every year (HMRC, Number of income taxpayers, 28 June 2019, link).
The median weekly wage is £479 – or £394 after tax (under current plans). This is equal to around £78.80 a day, so £2,400 is equivalent to 30 days of work. This is based on 30 calendar days including weekends, so in reality it would take more than six weeks of working Monday to Friday to pay off (ONS, ASHE Table 1, 29 October 2019, link).
Labour’s resource black hole, divided by the 19.1 million families in the UK, would see each family liable for £19,598.70 over five years (ONS, Families and households, 7 August 2019, link).
That means families will have to pay an additional £3,900 in tax every year to cover the £374 billion black hole in Labour’s resource spending plans. This is equivalent to each family across the country paying £75 a week more in tax.
This can be averaged across the regions, as shown in the table at the link (HMRC, Number of income taxpayers, 28 June 2019, link; ONS, Country and regional public sector finances revenue tables, 28 May 2019, link).
Of this total, Labour have made £651 billion worth of spending commitments that are considered day-to-day spending and therefore cannot be borrowed for (The Telegraph, 10 November 2019, link; The Conservative Party, The Real Cost of a Labour Government, 10 November 2019, available upon request).
Labour said their 2017 manifesto would raise £48.6 billion a year, or £243 billion over a Parliament. However, part of this includes revenue from introducing VAT on private schools, which, due to a motion passing a Labour conference, it is now party policy to abolish. Giving Labour the benefit of the doubt, we have assumed this would not happen in year one, so have included revenue of £1.6 billion for the first year from this (The Labour Party, Funding Britain’s Future, May 2017, link).
Since 2017, Labour have committed to introducing further revenue raisers worth £40.5. billion over five years (CRD analysis, 10 November 2019, available upon request).
Even taking revenue raisers into account, Labour are facing a blackhole of more than £370 billion on their day-to-day spending. They have committed to £651 billion of day-to-day spending, but have only announced revenue raisers worth £277 billion over a five-year Parliament – leaving a blackhole of £374 billion (CRD analysis, 10 November 2019, available upon request).
A Labour policy document called for a new ‘progressive property tax’, which would see the average household pay up to £375 more on property tax than under the current Council Tax system. This is expected to raise an additional £10.2 billion across England compared to the current Council Tax system (Labour Party, Land for the Many, p.33, June 2019, link; Resolution Foundation, Options for reforming property taxation, March 2018, link; alongside analysis of Land Registry, UK House price index summary, March 2019, and MHCLG, Live Tables on Council Tax, March 2019)
A Labour Party policy document states: ‘Applying a capital gains tax to main residences too would allow us to limit the wealth inequality arising from the housing boom’. Scrapping the Capital Gains Tax exemption on main homes would force owners to pay income tax on the profits when they move home – and lead to a ‘double whammy’ levy on their estates when the owners die. Such a tax could raise £28 billion a year (The Labour Party, Land for the Many, p. 34, June 2019, link).
This would mean a huge tax hike for most people who inherit the family home their parents. Labour’s proposal is for a new ‘lifetime gifts tax’ on cash or homes given to individuals during the course of their lives. This is expected to raise an additional £9.2 billion a year (The Labour Party, Land for the Many, June 2019, link).
Shadow Transport Secretary Andy McDonald has said: ‘Fuel duty, frozen since 2010 … Air passenger duty in aviation, broadly frozen over a similar period … This is not a sensible approach to transport policy’.
Increasing fuel duty is expected to raise up to £855 million a year; raising Air Passenger Duty could raise £300 million a year (Andy McDonald speech to the Institute for Government, 20 March 2019, archived; HMT, Budget 2018, 29 October 2018, link; Hansard, 10 July 2018, link).
These taxes would raise around £48.6 billion annually, or £242.8 billion over five years. There is still a black hole of £131.6 billion – or £26.3 billion annually – that Labour would need to fill.
He said: ‘We have to talk about tax. The basic rate of income tax was 25 per cent a generation ago; now it’s 20 per cent… if we want dignity for all in old age, then it has to be paid for’ (The Daily Telegraph, 1 September 2015, link).
Read more about how this would mean higher taxes for you and your family here (PDF)
Commenting, Therese Coffey, Secretary of State for the Department of Work and Pensions, said:
“Corbyn’s Pension Tax will see ten million savers facing a huge bill forcing them to delay their retirement for almost three and a half years.
“This is just one of the ways a Corbyn government would hammer hardworking people on top of his plans to hike up taxes by £2,400 a year, as well as the cost of his plan for unlimited immigration and the chaos of 2020 being dominated by two more referendums – one on Brexit and another on Scottish independence.
“Only Boris Johnson and the Conservative Party can get Brexit done with a deal, get parliament working again and turbocharge our economy to unleash Britain’s potential.”
Read more about how this Pension Tax will impact millions of savers (PDF)
