Johnson and Hunt spending plans like ‘throwing sweeties at the children’
Boris Johnson and Jeremy Hunt have set out a range of eye-catching policy measures – but they come with an eye-watering cost.
Boris Johnson and Jeremy Hunt have set out a series of eye-catching pledges to boost spending and cut taxes as they battle to become the next prime minister.
But how much will it all cost – and where will the money come from?
Mr Johnson has pledged to give a tax cut to earners on more than £50,000, by raising the threshold at which people begin to pay the 40p rate of income tax.
Analysis by the Institute for Fiscal Studies (IFS) said this would cost around £9 billion and benefit the top 10% of earners.
Then he insisted he would prioritise cuts for the lowest paid, with a raise to the amount workers can earn before they start paying national insurance contributions (NICs), this would cost around £3 billion for each £1,000 the threshold is raised by.
Mr Hunt wants to cut the main rate of corporation tax cut to 12.5%, a measure that the IFS said would cost the Exchequer £13 billion per year in the short term.
The Foreign Secretary has also indicated a desire to cut NICs, with the same £3 billion cost for each additional £1,000 workers can earn before paying them.
Former mayor of London Mr Johnson has promised to recruit and train an additional 20,000 police officers, at an estimated cost of £1.1 billion a year.
He also wants to reverse cuts to education, with school funding increasing by £4.6 billion a year by 2022/23.
His plan includes ensuring £4,000 per pupil funding for primary schools at a cost of £306 million above current levels, and £5,000 for secondary schools at a cost of £49 million.
Met some fantastic new recruits at the Thames Valley Police Training Centre this morning. In London we cut crime by 20 per cent and halved the murder rate. If I become PM, I’ll give the police the support and resources they need to protect communities pic.twitter.com/RagY6J0Q4w— Boris Johnson (@BorisJohnson) July 3, 2019
Mr Hunt’s plans include increasing defence spending to 2.5% of national income over the next five years, costing around £12 billion more by 2023/24 than if spending remained at its current level of the 2% target for Nato members.
If the UK is heading to a no-deal Brexit, Mr Hunt would establish a £6 billion fund for the fishing and farming sectors to help them cope.
In an attempt to win back young voters to the Tory cause, Mr Hunt wants to review the high rates of interest on student loans, cutting it to the RPI rate of inflation would cost just over £1 billion in the long run, according to the IFS.
He has also promised to write off the tuition fee debts of graduates who become entrepreneurs employing more than 10 people.
While the candidates have been keen to set out plans to offer tax giveaways and increase spending, they are far less clear about where the money will come from.
Both Mr Johnson and Mr Hunt have their eyes on the “fiscal headroom” build up by Chancellor Philip Hammond, a buffer of around £26-27 billion.
The “fiscal firepower” we have built up in case of a No-Deal Brexit will only be available for extra spending if we leave with an orderly transition. If not, it will all be needed to plug the hole a No Deal Brexit will make in the public finances.— Philip Hammond (@PhilipHammondUK) July 1, 2019
But that money was set aside by the Government as an emergency war chest to cope with a no-deal Brexit and can only be used for the kind of crowd-pleasing measures promised by Mr Johnson and Mr Hunt if an agreement is reached with Brussels.
A no-deal Brexit, which has not been ruled out by either Mr Johnson or Mr Hunt, would result in a £90 billion hit to the Exchequer, he has warned.
IFS director Paul Johnson was scathing about the approach adopted by the rival campaigns.
He told PA: “While the two candidates have put forward tens of billions of pounds worth of proposals to increase spending and cut taxes, they have provided no sense at all of what their overall fiscal strategy would be, what level of deficit and debt they would be happy with, or how they would deal with the problems of long term fiscal sustainability as set out by the Office for Budget Responsibility.
“This is not currently a grown up discussion or strategy, it is a little more than a random throwing of sweeties at the children.”
£27bn is difference between forecast borrowing and limit Mr Hammond set for next year. But— Paul Johnson (@PJTheEconomist) July 1, 2019
(1) It’s a 1 year target so can’t fund permanent tax cuts/spending increases;
(2) “spending it” just means more borrowing
Maybe fine but what are candidates’ actual fiscal targets? https://t.co/9GBkq1HDeN
He said the headroom highlighted by both camps was the difference between forecast borrowing and the limit Mr Hammond had set for next year.
That was a one-year target, so could not be a sustainable source of funding for permanent tax cuts or recurring spending increases of the kind promised by the two would-be prime ministers.
And by spending it, that just meant more borrowing, slowing the rate at which the country’s finances are repaired.