All three main parties will leave us worse off, analysis of their manifestos says.
The Conservatives, Labour and the Liberal Democrats would all make the average household poorer over the next five years, according to analysis of their General Election manifestos by respected thinktank the Institute for Fiscal Studies (IFS).
There are “large differences” between them, but they “share a lack of willingness to be clear about the details” when it comes to spending cuts, the IFS writes in a rather damning conclusion to its study.
Main similarities
All three main political parties believe there is “a huge amount of money to be extracted through a clampdown on tax avoidance (mysteriously missed by all previous clampdowns)”, the IFS says, but it casts doubt on just how much.
National Insurance and VAT won’t be fundamentally changed by any party, although the Conservatives have now gone further and pledged to introduce a law preventing increases in Income Tax, VAT and National Insurance in the next Parliament.
Meanwhile, the so-called ‘triple lock’ on the Basic State Pension and the move to a single State Pension will be preserved by all. The IFS says the decision to base one of the elements of the triple lock on average earnings is "absurd" as it means pension payouts will be higher when people have more money and vice versa.
But the Conservatives and Labour both want to change how much people can save into private pensions, which the IFS says is altering the “treatment of an eminently sensible part” of the tax system and is “worrying”.
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Main differences
The Conservatives want to increase the tax-free personal Income Tax allowance and increase the higher rate (40%) threshold. The Lib Dems also want to increase the personal allowance
Labour, meanwhile, wants to reintroduce the 10% starting rate of Income Tax, which the IFS says is pointless, and increase the additional rate from 45% to 50%. The IFS questions how much the latter move would raise, if anything.
Labour and the Liberal Democrats leaving the higher (40%) limit untouched would slowly suck more people into this tax band, a process known as fiscal drag.
[SPOTLIGHT]The IFS also criticises the fact that the additional rate starting point of £150,000 is not being increased in line with inflation.
Labour and the Liberal Democrats both want to introduce a ‘Mansion Tax’, which the IFS says is “unnecessarily complicated”.
The Conservatives will also protect all pensioner benefits, which the IFS says will make it “very challenging” for it to find its promised benefit savings from elsewhere. Labour will withdraw winter fuel payments from richer pensioners, which the IFS says will raise a “paltry” sum, while the Liberal Democrats will end free TV licences for over-75s.
The Conservatives have said they will freeze working-age benefits for two years, but the IFS says it is “disappointing that no further details” about the other ways it’s going to save £12 billion have been revealed.
What the IFS would do instead
The IFS says reforms to Council Tax, which in England and Wales is still based on 1991 values, would be a better measure than a Mansion Tax.
In terms of the Conservative cuts to benefit spending, the IFS proposes a series of ideas including abolishing Child Benefit but compensating lower-income families through Universal Credit and making Housing Benefit claimants pay at least 10% of their rent.
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General Election: what the party promises mean for your money