Tuesday 5th November – the day before the 2019 general election campaign officially kicked off – was pencilled in on the Conservative grid as tax bombshell day. The Chancellor, Sajid Javid, had commissioned Treasury officials to carry out a costing of Labour’s policies, but Cabinet Secretary Sir Mark Sedwill vetoed publication at the last minute for fear of breaching civil service impartiality. The Conservatives responded by issuing their own costing of Labour’s plans – which they put at £1.2 trillion over five years – and planting it as a front-page story in three Sunday papers. Tory strategists are reported to be ‘pleasantly surprised’ by the way in which the £1.2 trillion figure has cut through to voters.
For readers of a certain age, the attempt to put a price tag on Labour’s spending plans immediately brings back memories of the 1992 election, when John Major and Chris Patten relentlessly warned voters that a Labour government would mean a £35 billion ‘tax bombshell’ – the equivalent of ‘£1,000 more tax a year for the average taxpayer’. Yet manifesto costings date back long before the 1990s, as I show in a new working paper published by the Bennett Institute for Public Policy. Indeed, the Conservatives carried out a costing of Labour policies as early as 1929, claiming that ‘Socialist schemes mean £250,000,000 a year more in taxes’ in a poster which portrayed Ramsay MacDonald as a highwayman. The fully-fledged ‘tax bombshell’ strategy seems to have been devised by Iain Macleod and Michael Fraser in the run-up to the 1955 election, when the Conservative Research Department costed Labour’s mid-term programme Challenge to Britain at between £1.76 and £2.68 billion. The figures bore no relationship to Labour’s eventual manifesto, but Macleod plugged away at the figure, and accused Shadow Chancellor Hugh Gaitskell of planning to levy ‘another £2 per family per week in extra taxes’.
Since the 1950s, the ‘tax bombshell’ has been a recurrent feature of Conservative election campaigns, especially when the party is in government. From 1964 onwards Treasury officials were involved in costing opposition plans, and during the 1980s the process was formalized, with a rolling ‘Checklist of Alternative Economic Policies’ providing a basis for pre-election dossiers on the Labour and SDP/Liberal Alliance programmes. Harold Wilson, Jim Callaghan, and Gordon Brown commissioned similar analyses of Tory proposals when Labour was in office. Many of the figures produced were spurious, as civil servants privately noted, because they assumed that parties would carry out their pledges at once and that the cost would be equally divided between households. Since 1987, opposition parties have worked hard to buttress their fiscal credibility by publishing their own costings and emphasizing that policies would only be implemented ‘as far and as fast as resources allow’. Even so, the unhappy experience of John Smith’s 1992 ‘Shadow Budget’ showed how hard it could be for Labour, in particular, to shake off its reputation as a ‘tax and spend’ party.
It is not difficult to see why accusations of ‘tax bombshells’ and ‘Tory cuts’ have been so powerful: they are often framed in simple and memorable terms, exploit a cognitive disposition towards loss aversion, and relate directly to voters’ personal finances. What is perhaps more striking is the broader way in which governing parties have used costings to shift the focus away from retrospective evaluations of their record in office and towards a prospective analysis of fiscal choices. The rituals of Budget Day and the aura of authority which surrounds the Treasury’s spending plans mean that forward-looking fiscal debates appear to be structurally weighted towards incumbents.
This asymmetry may be one reason why the UK and other Westminster democracies – such as Canada and Australia – have moved into an era of long electoral cycles since the 1970s. In an age in which the prevailing economic discourse has emphasized the risks of debt and deficits, opposition parties have struggled to show how new policy initiatives can be paid for without unpopular tax increases or spending cuts. Ed Balls’ proposal that the Office for Budget Responsibility should carry out an independent costing of all parties’ plans, which he made in the run-up to the 2015 election, would be one way of raising the quality of fiscal debate and, perhaps, levelling the playing field.
As things stand, the 2019 campaign is taking place in a fiscal fog, exacerbated by the postponement of the November budget and the decision not to publish the OBR’s latest fiscal forecasts. The UK economy has only narrowly escaped recession – with 0.3% growth in the July-September period after a 0.2% fall in GDP in April-June – and the IFS has estimated that the 2019/20 deficit is likely to be almost twice as large as the OBR predicted in its spring statement. After a decade of often painful austerity, and with long-term trends towards higher health, social care, and pension spending as a result of an ageing population, the early 2020s is likely to be a period of net tax rises – especially if Brexit leads to an economic downturn. It remains to be seen whether any of the parties is prepared to confront voters with these unpalatable truths. The ritual exchange of exaggerated figures is no substitute for a serious debate on the UK’s forthcoming fiscal choices.