The Green Party’s tax & spending platform GE2019: small errors with big numbers
I’d rather avoid adding to the avalanche of post-election analyses claiming to understand exactly what happened and why, but it is worth taking a little time to clarify a few fiscal points in the small area where I was involved.
The Green Party of England & Wales had a reasonable campaign, in that our vote rose slightly, our agenda was much more to the fore than in previously elections and we performed better under pressure than we ever have done before.
In my view, the reason for the last success was the 3 or 4 years of work, planning, debate and co-ordination that went into the creation of the manifesto, along with the more connected and holistic approach taken to create it.
For the first time, in my view, the Green manifesto was more than just a wish list hoping to inspire the electorate, it was a detailed plan of action for government, well articulated by our spokespeople.
Although it still included massive increases in government expenditure (which I’ll get to in a second), it also showed how that government intervention would work, why and where it would be effective, and what impact it would have (and on which sectors of the economy/society).
For that reason, despite having a much more ambitious fiscal programme than the other political parties, it more or less held up to scrutiny.
It might have held up even better, if it weren’t for a couple of obvious mistakes in our numbers. This isn’t the bit where I take aim at the leaders or other political activists; the mistakes were largely mine.
So, mea culpa, these are the bits that I got wrong (or rather overlooked) that might have made our case a little easier had they been correct.
The numbers are all listed at the bottom of this article, but here’s the highlights (all rounded up and down, so apologies for slight inaccuracies):
We committed to investing £100bn per year for 10 years on creating sustainable infrastructure right across the economy. Most of this (£90bn+) would come from borrowing at historically low rates. Government borrowing rates are currently negative in real terms — investors are effectively paying gov’t to take their money — so it would be really very odd not to fund infrastructure investment in this way. Some would also come from revenue/day-to-day gov’t spending. The entire plan was set out in the manifesto and costed at current rates of government borrowing/spending. The servicing of this debt and the cost of additional revenue spending would be around £23bn per year. All this withstood journalistic and political attack, and we can still use it with confidence.
The most popular line that journalists used was that increasing gov’t debt would force interest rates up and increase this cost, but the recent evidence actually points the other way: The UK gov’t since 2010 has added £800bn to public debt, and gov’t borrowing rates have fallen. Of course, they might increase, but they would have to double to have any real impact on gov’t finances (and probably quadruple before it became even a small problem)
The Institute of Fiscal Studies landed probably the only serious criticism of that plan, and that was the likely inability of government to scale up investment projects on that scale at the speed required. However, this is a criticism of the capacity of gov’t in general to perform, not of the Green Party’s aspiration to achieve net zero carbon by 2030.
So that bit was fine, and if that was all we were proposing at the election, then fiscally, at least, we would have been pretty safe.
However, we were also proposing an additional government spending programme on everything form Universal Basic Income to free University education that would have run up a bill of another £140bn per year by the end of a term of Green government.
This pushed our potential additional spending plan to as much as £240bn per year. This translated to public spending at 49% of GDP, and taxation at around 45% of GDP. Still lower than some European countries, but higher than anything the UK had ever seen in peace time, and certainly a bigger jump than any other single term of parliament since WW2 has seen.
This probably stretched the manifesto’s credulity beyond what many neutral observers could reasonably stand, but it is in fact inaccurate.
Of the additional £140bn of spending beyond the Green New Deal, around £38bn was earmarked to be saved from other government programmes. In addition, of the massive £87bn cost of the Universal Basic Income, around £34bn was to account for a fall in income tax revenues for those earning above the £12,500 tax free threshold. For them, a UBI paid net of income tax actually represented a tax cut (rather than a spending increase).
So taken together, these two figures will reduce the amount of net tax increases from £140bn to around £68bn. So instead of gov’t spending increasing to 49% of GDP, the Green proposals would have actually seen it increase to around 46.5%, while taxes would have been 41% of GDP, rather than 45%.
This was the bit that I missed, mainly due to the rushed nature of the election and spreading our resources too thinly at the start of the campaign.
You could argue that it wouldn’t have made much difference, and you might be right, but nonetheless it would have made our proposals seem even more modest and given us a more robust response to the “your numbers don’t add up” or “your spending would be out of control” arguments.
By European standards, our investment, spending and tax proposals wouldn’t even have pushed us into the top half of the league table. They are, and continue to be, modest by any international standards.
Going forward, it would be useful for the Green Party to tidy up its fiscal projections and use the more reasonable numbers to make the case for the full funding of national infrastructure to tackle climate change, as well as the better funding of public services and income redistribution to achieve a fairer outcome for all citizens.
Full calculations are attached below
