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Election manifestos: The state is back

Election manifestos: The state is back
Published by
The Economist

5m read

19 May 7.31am

Hargreaves Lansdown is not responsible for this article's content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest. Article originally published by The Economist.

The three main parties are proposing very different policies. Yet they have a common thread: a more intrusive role for government

Aa the old saw has it, nobody reads party manifestos. Most voters have made up their minds, and undecideds choose on the basis of leadership, not election pledges. Yet manifestos matter, for two reasons. One is that they count in government, especially when, as now, there is no majority in the House of Lords (by convention, the Lords do not oppose manifesto commitments). The other is that manifestos are a guide to parties' philosophy.

The first impression from this week's Labour, Liberal Democrat and Conservative manifestos (the third emerged as we went to press) is of clear blue water. Labour is proposing big spending increases, financed mainly by sharp rises in taxes on companies and the rich (defined as earning above £80,000, or $104,000, a year). The Tories are more frugal, though they are dumping their commitment not to raise income tax and national insurance contributions; they are also alone in not guaranteeing the "triple lock" for state pensions. The Lib Dems are in the middle: more spending than the Tories, less than Labour.

Policy differences exist also over education, health and social care (for which the Tories propose to make the rich elderly pay more), as well as on Britain's exit from the European Union. Here Labour makes its priority the economy and jobs. The Tories' emphasis is on controlling immigration and escaping the European Court of Justice. And the central plank of the Lib Dem manifesto is a second referendum on a Brexit deal, with continuing EU membership as a clear alternative. In this election, in short, voters can hardly complain that they do not face genuine choices.

Yet, beyond the headlines, what emerges more strikingly are the common themes. One is the absence of much mention of the budget deficit. Torsten Bell of the Resolution Foundation, a think-tank, points out that in 2010 and 2015 this was the central issue; as the deficit has fallen, so has its political salience. Yet given the risks associated with Brexit, and fears of a possible future recession or another market crash, a continuing large deficit and a public debt of 90% of GDP ought to be of greater concern than they are.

A second is how little appetite there is for cutting taxes, rolling back regulation and lightening burdens on business. All three parties seem, instead, to want to increase the state's role in the economy. None of the three leaders seems to be a true economic liberal, including the nominally liberal Tim Farron. They appear to share the notion that markets need more curbs, not more freedoms. As one observer puts it, this week's manifestos show that all have, to some degree, reverted to a pre-Thatcher way of thinking about the economy and free markets.

This is most obvious in the case of Jeremy Corbyn, Labour's leader. His manifesto does not just propose a lot more spending, but also an extensive programme of renationalisation, including Royal Mail, the railways and the water companies. For all Labour's insistence on fiscal responsibility, there is little sign of how to pay for all this: a current budget balance is not a budget balance, and there are good reasons to question the revenues likely to be generated from higher income and corporate taxes. Labour also proposes new rights for workers and trade unions and measures to curb top salaries, including an "excessive pay levy" on companies that have very highly paid staff.

This is the most left-wing manifesto that Labour has proposed since Michael Foot's notorious "longest suicide note" of 1983, even if many details are less loony than then: no import or capital controls, for instance. Oddly for a leader whose main interest is foreign affairs, Mr Corbyn is strikingly moderate in this area. His manifesto pledges to maintain the nuclear deterrent, supports NATO and promises to stick to the target of spending 2% of GDP on defence, all policies that contradict what Mr Corbyn himself has stood for in the past.

Yet it is Theresa May's manifesto that is most interesting, and not just because she is on course for victory on June 8th. For it reveals a Tory leader whose instincts are more interventionist than any predecessor since Edward Heath in 1965-75. To deal with complaints about energy prices, she joins Labour in proposing price caps. She promises a new generation of council houses, although she is cagey about how to finance it. She also backs a higher minimum wage, albeit smaller than Labour's.

Mrs May is promising not just to retain all EU rights for workers after Brexit, but to add to them. Her manifesto includes several digs at business, including demands for more transparency on executive pay and some form of worker representation on boards. As Paul Johnson of the Institute for Fiscal Studies, another think-tank, notes, the biggest example of her interference in the market concerns immigration. She restates the target of cutting the net figure below 100,000, from almost three times that today, and she makes clear that the cost of policing lower EU migration must fall on employers.

In part what Mrs May is doing is merely tactical. On Brexit and immigration, she wants to mop up voters who formerly backed the UK Independence Party. On social and employment policies, she hopes to steal Labour moderates. Judging by the polls, she is doing well on both fronts. Yet her manifesto also reveals a new Tory paternalism, no longer aiming to reduce the reach of the state but instead pursuing an interventionist strategy.

What is oddest about this is not its break from the past, but its timing in relation to Brexit. Mrs May is pursuing a "hard" Brexit that involves leaving the EU's single market. If business is to thrive and new investment to be attracted in the uncertain world that this will create, a more logical move would be to reduce intervention, cut red tape and lower taxes. To choose this moment to move closer to a continental European model of more regulated markets is not just perverse but risky. No wonder business is lukewarm about Mrs May's manifesto - and about its own prospects in a post-Brexit Britain.

This article was from The Economist and was legally licensed through the NewsCred publisher network. Please direct all licensing questions to legal@newscred.com.

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  • 19 May 7.31am
  • 5m read

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Article originally published by The Economist. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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