The IFS' analysis is based on right-wing assumptions.
The Institute for Fiscal studies (IFS) has shared their response to both the Tory and Labour 2019 manifestos today.
Conservative manifesto
Addressing the Conservative manifesto first, the IFS they “believe most aspects of public policy are just fine as they are.
“Little in the way of changes to tax, spending, welfare or anything else. Yes, there are some spending increases for health and education already promised, but essentially nothing new in the manifesto”.
The IFS remains silent but the Conservative spending plans effectively mark the continuation of economic stagnation and what a report this week called the most extreme form of capitalism.
The IFS has nothing to say about the impact of Conservative policies on low wages, widening inequalities in the distribution of income and wealth, longer queues at hospitals, crumbling schools and roads, unprecedented use of foodbanks by the working poor, rip-off prices for gas, water, electricity, trains; and an unprecedented decline in life expectancy.
The IFS analysis mistakenly treats the economy as some kind of a household where income and expenditure has to be balanced each year. This is nonsense and no government can afford to pursue such policies.
The impact of the 2007-08 banking crash was mediated by taxpayer funded bailout of banks and a quantitative easing programme i.e. government effectively printed money. That benefitted banks and large corporations and we did not hear a peep from the IFS.
Even then, the IFS is silent on the huge increase in the UK public debt under the Conservatives. Despite austerity, the public debt is at the end of October 2019 stands at £1,798.5bn compared to £960bn in April 2010.
The IFS does not even note that over the last nine years, tax revenues of between £300bn to £500bn/£1100bn have not been collected.
The state we are in
No matter how the IFS dresses its comments, it can’t conceal its neoliberal agenda. Its ire, as is now common, is reserved for the Labour policies. The biggest criticism is that a Labour government would play a greater role to stimulate the economy and would introduce redistributive measures. Labour has provided costings for all its policies and they are all affordable.
The IFS seems to subscribe to the myth that the neoliberals have somehow rolled-back the state and that is a good thing to do. This is rubbish. Neoliberals have reconstructed the state to advance their project.
The Private Finance Initiative (PFI), outsourcing and partial privatisation of the NHS have made the state the ultimate guarantor of corporate profits. It has showered tax cuts on corporations. The headline rate of corporation tax has declined from 28% in 2019 to 19% in 2019.
Between 2010 and 2016 alone, this boosted corporate coffers by £16.5bn a year. Tax cuts have been thrown at the rich and the marginal rate of income tax on incomes above £150,000 was reduced from 50% to 45%.
The same state increased the rate of VAT from 17.5% to 20%, and hit the poorest the hardest. Conservatives imposed wage freezes on normal people whilst nothing has been done to control exorbitant executive pay.
One outcome is that 42% of UK adults have an annual taxable income of less than £12,500 a year. An estimated 14.3 million people live in poverty. This includes 8.3 million working-age adults, 4.6 million children, and 1.3 million people of pension age. 4 million people are trapped in deep poverty, meaning their income is at least 50% below the official breadline.
Such inequalities systematically prevent a large section of society from realising its full potential. It can fade away, search for pitch forks or mobilise the state to secure a fairer distribution of income and wealth. Labour’s manifesto offers the latter possibility.
The IFS says Labour “would impose a swathe of new labour market regulations; their minimum wage would directly set the wages of a quarter of private sector workers”. It does not explain how in the absence of mobilisation of the state workers are going to secure a decent wage or employment rights.
Markets and corporations do not voluntarily address such matters even when they can see that erosion of people’s purchasing power has turned large swathes of town centres into economic deserts. It is a matter of national shame that a quarter of private sector workers don’t even earn £10 an hour.
The IFS is concerned about Labour’s plan to bring energy firms, National Grid, railways, Royal Mail and the broadband arm of BT into public ownership. However, it does not say anything about profiteering by energy, water, gas, electricity or train companies and its impact on prices and quality of life.
Despite privatisation, the rail industry received taxpayer subsidy of £7.1bn in 2018-19, which is an increase of more than 200% since privatisation. Fares are 20% higher in real terms than they were in January 1995. Public ownership of railways would end subsidies which finance dividends to shareholders.
Overall, the IFS analysis provides support for status-quo and despair rather than a reconstruction of society to enable everyone to live a fulfilling life.
3 Responses to “Why the Institute for Fiscal Studies (IFS) is wrong when it comes to the Labour and Tory manifestos”
A berry
That last sentence. Needs unpacking as who knows how others choose to lead a fulfilling life. I doubt that Corbyn should make that decision for anybody or how to reconstruct society ? The left has set its face against equality in the democratic process of representative government; it seeks to continue the route to largest minority rule and disenfranchising the majority of voters
Maybe if all votes were counted and all votes counted citizens might have more trust .
But agree that welfare spending must rise to support equality of opportunity in housing health education employment etc
Unhappily the socialist experiment here in Russia east Europe etc does not give much hope
How about some more critical engagement from us all? The left is peddling old approaches to new problems
Ian Robert Stevenson
The last sentence A berry is not about Corbyn or the state deciding. It is about giving people enough opportunity to make those choices. The levels of poverty resulting from the policies of the last ten years, have risen and those with poor housing, education or health will not have the same opportunities.Social mobility is slightly below that of the US, while Scandinavia, Germany, Netherlands and even France do much better. The US and UK are the most neo-liberal economies from that group.
The Socialism of Russia meant that almost all industry was state owned and run. Labour is not implementing that. It is going to take the utilities and railways into public ownership which is much the same as we find in the other European countries I mentioned.
Jill Brian
The great privatisation project of Margaret Thatcher and then Tony Blair, have failed public services which were introduced by Labour to ensure that no-one should be so poor that they could not afford to feed, house or educate their family even if they were unable to work due to disability, illness or old age.
Public services should be owned for all the public, not to make a few rich people even richer by exploiting those who work for them.
In Victorian times, those who were destitute were housed in Workhouses and provided with a basic diet. Some philanthropic bosses such as Cadbury in Birmingham and Rowntree in Liverpool provided decent housing close to the factories to house their workers. Well treated workers work better ie: productivity improves. The Cooperative model where workers own a stake in the business and can take part in decisions, increases productivity even further.
Parliament is supposed to represent constituents, but the FPTP we have does not lend itself to collaboration or cooperation to find the best options for the most people, but encourages antagonism between the viewpoints of the two main parties.
Returning public services to public ownership should encourage more participation by the public in the way these services are run and I should like to see the salaries/wages of those earning the most be not more than 10-20% max: bigger than those of those earning the least. That should help to reduce costs to the public purse too, but it would need to be enshrined in law with significant sanctions for bosses who exceed the limit.