Like the Lib Dems and Greens (and unlike the biggest two parties), UKIP have released a manifesto that includes a list of what each policy costs (see pages 74-75). They have even had an independent body check that those costs sound reasonable, and put a lot of emphasis on their manifesto being “fully costed”. Kudos to them, you might say, but unfortunately their sums don’t add up.
For 2019-20 they have identified £32 billion of savings – largely from slashing overseas aid, ending EU contributions, cancelling HS2 and reducing Scottish spending. And £32 billion is then used for tax cuts (such as scrapping inheritance tax) and some spending increases. In this sense – and assuming all of these costs are indeed correct – the sums do balance. But…
It’s not enough for these sums to add up to zero. Their manifesto says they are “the one party that can stick to the Treasury’s deficit elimination plan” and that “UKIP MPs in the next parliament will make sure the Treasury sticks to this latest [Budget 2015] plan, with no backsliding.”
Sticking to this plan would require £40 billion of spending cuts and/or tax rises for 2018-19. The UKIP manifesto savings by 2018-19 (where they’d reach overall budget surplus) do give £3 billion leftover for deficit reduction after giveaways. But that leaves a £37 billion hole to reach their deficit target. And if the public voted against leaving the EU in their referendum as polls suggest they would (though they have also suggested they would leave the EU and then hold a referendum!) that hole grows to £46 billion.
Their manifesto gives no indication of how this hole might be filled or even any acknowledgement that it exists. The Conservatives, Lib Dems and Labour have all failed to specify exactly where all their cuts would fall, but they have at least – to varying degrees – given some sense of where the axe would fall. What’s more, the UKIP manifesto seems to rule out most of the possibilities.
Their other policies suggest they couldn’t cut the NHS or defence, and their money from scrapping HS2 and most international aid has already been promised away. They pledge to protect old age benefits, childcare, elderly day care, home care, Meals on Wheels, increase police numbers and maintain prison places. They welcome the pensions triple lock, and commit to “maintaining a strong and supportive safety net for those who fall on hard times”. They suggest various small savings and the merging of several departments, but then say that these savings would pay for the very expensive repairs of the Palace of Westminster.
To give a sense of the scale of the £37 billion hole, it is equivalent to almost the entire schools budget, or abolishing both tax credits and child benefit, or the combined budget of the Home Office, Justice, DWP, Communities, DECC, Defra, DCMS and the Foreign Office.
They say their plans add up “Without adding a penny to our burgeoning national debt, without cutting vital services and without raising taxes”. This is plainly untrue. That £37 billion gap – or over £100 billion across the whole five years – must mean further huge cuts, tax increases or abandoning their deficit target. Far from having the most robust manifesto in terms of its sums, UKIP’s has by far the biggest black hole.
* Adam Corlett is an economic analyst and Lib Dem member
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17 Comments
I’m not disagreeing with the thrust of this – far from it – but would you say the black hole is bigger than the universal basic income proposed by the Greens? Otherwise I couldn’t agree more; this is a very good point.
Let me think for a moment.
Do I believe an independent CEBR who works with all political parties, or do I believe a partisan analysis by Lib Dem member Adam Corlett?
Hmmmmm… tough choice.
UKIPs keenness to abolish Inheritance Tax, now, when we have a Trillion Pound national debt, ought to alert everyone, however clueless about politics, about the REAL motives for all this populist stuff portraying immigrants and Europe as the root of all our nations troubles… (Just in case not, though, here is a clue: the strings are pulled by some very rich people!)
Good stuff Adam.
@John The difference is that UKIP have aspirations to see some of these policies become reality. The Greens have ruled out forming part of any government which implies they have no desire to see their manifesto implemented. There is little need to hold them to account on that basis…
So we’re supposed to choose between a party like UKIP which publishes a budget shot through with holes, and a party like the Tories who don’t publish their budget because they know it is shot through with holes. Or Labour, who prefer sitting on the fence, which I suppose is one small step better than telling total porkies. Or the Lib Dems, who always used to be the most honest party, but nowadays tend to avoid the distinctiveness that a more honest approach could have given them.
All the parties have got into a similarly vicious circle. Nation does not trust politicians. Therefore, politicians have no incentive to tell the truth. May as well tell total porkies. Won’t fool the majority, but might impress a gullible minority. The easiest votes to win are those of the stupid and gullible. So let’s target stupid voters! It’s a tight race, every vote counts, so if we can sway the votes of a few imbeciles, then that’s the way to win it! Why bother trying to talk sense to intelligent people, when it’s so much more productive to sell bridges to the dumbest suckers around!
Good question, John. I think the problem with the Green costings is basically the reverse of UKIP’s. The Greens show how their policies – remarkably including lower growth – add up to give their (much looser) deficit goals, unlike UKIP. But while UKIP have had their *individual* policies costed (excluding the one about closing the deficit!), the Greens’ costings seem more plucked from the air. I don’t think the basic income is the problem – they don’t have plans to introduce that in the next parliament. But for example they don’t seem to sufficiently back up their claims that they can find a nice round £30 billion a year from tackling tax avoidance, or another £20 billion a year from a Robin Hood tax (or another £150 billion a year from other tax increases!).
Would the author like to tell us where he got his figures from because according to the OBR & Government estimates in the budget (page 23 & 110) the government will be £5 billion in surplus in 2018-19 . The deficit will have been eradicated. There is on the face of it no black hole in the government finances during that year and nothing for UKIP to address. Its all very well talking about black holes but they have to exist in the first place.
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/416330/47881_Budget_2015_Web_Accessible.pdf
How hard is it for people to understand. UKIP have outlined what they would do differently to the other parties and costed those differences and had them verified as reasonable by an independent think tank?
The author should also not conflate what UKIP would do as a government (all manifestos are written in such terms) and what they might do in opposition. When UKIP refer to a referendum in their manifesto they are referring to one initiated by them as a governing party and not some half baked Tory scheme. Therefore given governments rarely lose referendums (they are careless if they do) it should be assumed that UKIP would win an EU withdrawal referendum on their terms.
@Tomfrostrick
UKIP have made it very clear they are only interested in a very simple deal with a prospective governing party. That is they want an early free and fair EU In or Out Referendum for a supply and confidence arrangment. Thats it. They are not asking for any of their other policies to be taken into consideration so your assertion is false. UKIP do not have any aspirations for any of those policies to become reality except in the highly unlikely event that they should be come the government at some point in the near future (and clearly not after this coming election).
@ John Dunn,
My analysis above doesn’t contradict the CEBR’s answers. It’s just that the CEBR were not asked the right question.
They were asked to assess the cost/savings of 20-30 specific policies. They simply weren’t asked, it seems, whether those policies meet UKIP’s deficit goals or what the cost of those deficit goals would be. As I hope my post makes clear, that’s a pretty big omission which really undermines the whole exercise.
I do wonder if UKIPs deficit reduction goals include the possibility that leaving the EU would cause a crisis in the banking system, the car industry to collapse and foreign investment leak from the economy! Why are we taking them so seriously! UKIPs vision of the EU is like some sort of conspiracy theory where every thing is linked and to deny it is proof that you are part of some shadowy organisation called “the metropolitan elite”.
Good analysis from Adam, as ever. However my own view is that all the parties have failed to spell out the full implications of their policies and are misleading the public, albeit in different ways…
– The Conservatives have set out an overall fiscal ‘envelope’ through to 2019-20 (in the recent Budget), and have specified how they plan to divide the significant further budget consolidation between departmental spending cuts, welfare cuts and revenue-raising. However they have given little indication about where the axe will fall in order to deliver the relatively ambitious savings they are seeking, and have blatantly dodged the question of where most of their planned welfare savings are going to come from. Recently they have also made a slew of expensive tax and spending commitments some of which appear to be unfunded and which will only intensify the squeeze in other areas if they are to be delivered before the final year (by which time their planned fiscal consolidation is scheduled to end).
– Labour have been more coy about their overall fiscal targets (deficit falling from year to year, until they reach current budget balance/surplus of unspecified size) and in particular the timescale for hitting them (“as soon as possible” but also merely “by the end of the parliament”). This studied vagueness can be justified in Keynesian demand-management terms but, more to the point one suspects, it has the obvious political advantage of giving them a lot of wiggle room. As IFS director Paul Johnson said on Monday, we have literally no idea whether a Labour government would need to tighten fiscal policy after 2015-16 in order to hit its targets or – taking the less demanding interpretation of those targets – could start increasing public spending early in the parliament.
On the other hand, Labour have been more disciplined than either the Tories or the Lib Dems in terms of the specific policy commitments they have made: their “shopping list” of tax cuts and spending increases seems to be more modest and (like the UKIP one in fact) seems to be more or less balanced on the other side of the ledger rather than being assumed to be financed from the proceeds of economic growth. The question is over the cuts and tax rises they would need to make not to cover their own policy commitments but in order to hit their deficit reduction targets. But since these targets could be interpreted as less demanding than those of the other main parties, the hole to be filled may not be that large.
– The Lib Dem ‘alternative budget’ set out an overall fiscal envelope on the same model as the actual budget and, therefore we can say that – like the Tories – the Lib Dems have made clear the broad parameters within which their policy choices would be made. They have been clear about the target of cyclically-adjusted current balance (actually a small current surplus) by 2017-18. The longer-term target is slightly more malleable: overall budget balance over the cycle but with the exception of the “most productive” capital investment. It is not clear how this would be distinguished from capital spending as a whole or how it could be measured/assessed given that the National Accounts don’t currently break down capital spending in this way. But this is a technical point and to be fair the Lib Dem shadow budget in effect quantified it by projecting an overall budget deficit of 0.8% of GDP in 2019-20 (equating to a current surplus of about 0.5% of GDP if net investment is as per the Budget).
But while the fiscal targets are clear, as far as I can see the Lib Dems have not felt the need to cost their spending commitments in the itemised way Labour have. Instead, they are simply assumed to “fall out” from the projection that overall public spending will grow in line with national income in the final two years of the parliament (by which time the Lib Dems reckon the deficit will be sorted). In effect, then, things like the substantial extra NHS spending are to be financed by the proceeds of growth.
In fairness to the Lib Dems, this is how most governments of all colours have historically financed extra spending: not through tax rises or spending cuts elsewhere but through a growing economy making more resources available. However, for the purposes of drawing up the “fully costed manifesto” of which Lib Dems have always boasted, it is not clear that this approach is terribly satisfactory or convincing. It relies on the OBR’s growth forecasts being realised. These these forecasts are independent and not outlandish but – given the uncertainties both in the global outlook and in the estimates of the UK economy’s productive potential post-crisis – I would have thought a party claiming to be fiscally prudent should err on the side of caution rather than giving hostages to fortune.
Moreover, I don’t see why it is possible to identify large chunks of extra departmental spending through to 2019-20 yet not to spell out in similar detail the more imminent £12 billion of departmental cuts that the Lib Dems say are necessary. (The manifesto contains bromides about “funding proven spend-to-save initiatives” but basically says we will have to wait until the Spending Review to find out how cuts will be allocated between departments.) Overall, while the Lib Dems seem to want people to see them as less spendthrift than Labour they are actually making more costly spending commitments for the later years of the parliament and (like the Tories on the NHS) relying to a greater extent on the proceeds of growth rather than itemised policy costings.
– UKIP are taking something more akin to the Labour approach, but on a larger scale in that both their “giveaways” and “takeaways” are much bigger. Like Labour, they are giving little detail on how they would reduce the deficit – and, as Adam notes, in their case this is a major omission because they are endorsing the more ambitious fiscal targets set out in the Budget rather than Labour’s (seemingly) higher borrowing path. However, the actual policy costings look plausible, professional even, and have been certified by the respected CEBR. The one caveat I would make is that (as Adam implies) they are prejudging the outcome of an EU referendum and therefore ‘banking’ large annual savings from 2017-18 onwards that might not materialise. Their costings would have looked more prudent if their policy commitments had been fully funded without assuming this saving and it had been scored as a contingency. But I guess that would undermine their theme that most of their propsed cuts can be made in ways which the British public will barely notice…
Why bother to analyse today’s UKIP polices, they will have another set of policies by the time I finish writing his sentence.
UKIP have turned their expensive-looking coats many times since the byelections that gave hem a couple of renegade Tories as MPs only a few months ago.
Don’t waste time on the policies Farage pretends to espouse at the moment. He will have a whole new set of policies next time he opens his mouth.
Just so long as he can dog-whistle against foreigners, gays, the sick, the poor and foreigners, he will carry on with whatever jumble of policies he thinks you want to hear.
Do UKIP’s sum’s need to add up?
From what I’ve seen of the leaders debates, we have a bunch of people who are getting their 15 minutes of fame. In Nigel’s case he knows that he is unlikely to have a more than a few MP’s hence his best strategy is probably to rock-the-boat and be a little outrageous and so generate media coverage and column inches To some extent it is working, given the number of anti-UKIP articles were are seeing here on LDV.
Has any party ever claimed that a different parties sums add up ? I just wonder – after all, the only Party I can think of that said its own sums didn’t add up was the Lib Dems who had a full costed proposal to abolish tuition fees, but couldn’t do it because the sums didn’t add up, the economy was in a worse state and we couldn’t afford it because there was too much debt, although 1) There were no secret figures about the state of the economy and 2) The tuition fees proposals increased debt..
Caracus the Tuition Fees pledge was only unaffordable in the sense the Conservatives could not be persuaded it was a spending priority (not that I think the Leadership of the Party tried too hard to convince them). If we had governed alone and fully implemented our costed manifeto in full rather than having to make compromises with the Tories then we could have afforded to scrap tuition fees in a staged way as we proposed in our manifesto. For example we would have not cut the 50p rate of tax and would have raised capital gains tax further so had more tax income to spend than the Coalition Government did.
As to UKIP’s costings they seem to have made the mistake of thinking leaving the EU will save the Government billions of pounds a year when in fact the opposite is true as EU membership underpins much of the UK’s economy.
@ Manny Kent,
You are right that “There is on the face of it no black hole in the government finances during that year and nothing for UKIP to address”. However, beyond the face of it, the way the OBR projections work is that the government just tells the OBR that, e.g., there will be £40 billion of consolidation by that year but they don’t have to say where it will come from. As the OBR says, this “arises from what the Government itself describes as a ‘fiscal assumption’ and not from firm and detailed departmental plans.”
The spending cuts and tax clampdown proposed by the Conservatives are not what they need to go *beyond* the OBR forecast; rather they’re what’s needed to deliver it (and even they shy away from giving the actual total required). So would UKIP match the Conservatives’ £12 billion of welfare cuts, £5 billion from tax avoidance, and £13 billion (actually quite a bit more than that) of departmental cuts? Or would it all be from departmental cuts (as is the default, and requiring colossal cuts as I described)? Or would they borrow more or raise taxes?
@ Alex – thanks, I agree with most of that. It’s right to ask where exactly the Lib Dems’ £12bn of departmental cuts would fall, or how the Conservatives would cut £12bn from welfare, and so on. But at least they’ve given those numbers and broad divisions and said what they’d ringfence: that should be a pretty low bar to clear but with UKIP we just have no idea except that there’s a £37 billion hole.
As to whether I should be wasting my time analysing what UKIP say, that is a tough question…