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08/11/2019

IFS warns of trouble ahead for Labour and Tory spending plans

Words: Huw Morris
Growth deal funding / iStock-825886748

The public spending arms race between the two main political parties might be undeliverable, according to the UK’s top public finance think tank.

The huge spending programmes pledged by both the Conservatives and Labour will return UK public investment to levels last seen in the 1970s, says the Institute of Fiscal Studies (IFS). And it warns that whatever the colour of the next government, it will face significant problems delivering projects on the scale envisaged.

The Conservatives have promised to spend an extra £20 billion a year on capital projects while shadow chancellor John McDonnell plans to raise infrastructure investment by £55 billion in the next five years.

A Tory government would allow borrowing to rise from £47 billion currently to around £70 billion a year. Labour’s plans would more than double capital spending to £100 billion a year, putting the UK near the top of the international public infrastructure league table. Capital spending would be close to 5 per cent of GDP, a level last seen in the mid-1970s.

“Both parties’ plans would represent a sharp change in policy, and Labour’s plans are especially ambitious,” said IFS research economist Ben Zaranko. “The key challenge for a government seeking to deliver investment on this scale – particularly in a short timeframe – will be finding worthwhile and viable projects in which to invest.

“Shortages in the number of suitably skilled construction workers, a dearth of ‘shovel-ready’ projects and practical issues relating to delivery will be challenges the next government will need to think carefully about how to overcome.”

Image credit | iStock 

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