Good morning from New Economy Brief.

As the Conservative vote shows further signs of collapse, the policy positions of smaller parties become more important. A new poll from Opinium finds that 37% of all voters are currently backing one of the smaller parties, compared to Labour’s 40% and the Conservatives’ 23%. 

Smaller party manifestos won’t be implemented, but they still play an important role in public debate by introducing and promoting new policy ideas. One of these parties may even form the new official opposition if some polls are to be believed.

Today’s New Economy Brief takes a look at a few economic highlights from the manifestos of the Liberal Democrats, the Green Party, Scottish National Party (SNP), Reform and Plaid Cymru, and identifies some areas of potential challenge to the next government. 

Liberal Democrats: “For a Fair Deal.”

The Lib Dems’ manifesto proposes a larger tax-and-spend package than either Labour or the Conservatives, totalling £27bn of additional government spending. The largest portion of this goes to health and social care (including recruiting 8,000 more GPs and bringing the Scottish system of free personal care to England). The spending commitments are funded through higher taxes on banks, reforming capital gains tax, a new tax on aviation, cracking down on tax avoidance and maintaining the current freeze on income tax thresholds until 2028. The Lib Dems are also proposing a 4% tax on share buybacks, which could raise £1.4bn–£2.2bn a year and pay for extending Free School Meals to 900,000 more children.

Net zero by 2045. The Lib Dems promise to “put tackling climate change at the heart of a new industrial strategy”, and their manifesto calls for public banks to do more to support green investment, as well as re-establishing the Industrial Strategy Council and putting it on a statutory footing. They promise to give the UK Infrastructure Bank (UKIB) “a clearer zero-carbon remit” and expand the British Business Bank (BBB) to “perform a more central role in the economy, to ensure that viable small and medium-sized businesses have access to capital, and enable it to help ‘crowd-in’ private investment, in particular in zero-carbon products and technologies.” The manifesto also includes a strong commitment to “regulate financial services to encourage climate-friendly investments”. They plan to accelerate the deployment of solar and wind power so that 90% of power comes from renewables by 2030, and to provide free insulation and heat pumps for low-income households.

Reforming Universal Credit. The Lib Dems want to remove the two-child limit on Universal Credit and the benefit cap (currently still supported by the two major parties). These both limit how much income households can claim through social security. They also plan to review annual benefit levels, which anti-poverty campaigners like Joseph Rowntree Foundation and the Trussell Trust say moves towards an ‘essentials guarantee’ to keep benefits  high enough that people can always afford basic necessities like food and energy.

Corporate governance reform. The Lib Dems want to ensure all large companies have a formal statement of corporate purpose and report on their social and environmental impacts (see the High Pay Centre’s submission to a recent consultation and our previous New Economy Brief for more on corporate governance reform). They also want to promote employee ownership by giving staff in listed companies with more than 250 employees a right to request shares. They also want a new ‘Worker Protection Enforcement Authority’ to enforce the minimum wage, and say they will add 20% to the minimum wage for workers on zero-hours contracts to compensate them for the uncertainty of fluctuating hours. 

Other interesting policies. On education, the Lib Dems want to bring in a tutoring guarantee for children from low-income families, increase funding for schools and bring back university maintenance grants which were scrapped in favour of loans in 2016. Rejoining the EU single market and a ‘longer term objective’ of rejoining the EU sits at the heart of the Lib Dems’ retail offer. They also want to reduce arms sales to countries with poor human rights records and seize frozen Russian assets in London. (See our previous New Economy Brief for more on the latter.)

Green Party: “Real Hope, Real Change.”

The Green Party’s manifesto proposes the largest fiscal package – £70bn of additional spending, with £50bn allocated to health and social care to reduce hospital waiting lists, speed up access to dentists and GPs, and raise junior doctors' pay by 35% to redress the effects of years of below-inflation increases. The remaining £20bn is to tackle the crisis in adult social care. They are also planning to raise annual capital spending by £90bn, £40bn of this earmarked for green investment and £20bn for new NHS buildings and equipment. They have made a “cast-iron guarantee” that any Green MPs will oppose further privatisation of the NHS.

Taxes. The Greens want to fund their extra spending with extra taxes, including higher National Insurance Contributions and Capital Gains Tax, new carbon taxes and a £15bn wealth tax aimed at billionaires. The last of these has been a debating point so far. The IFS thinks “some of the individual tax measures look sensible” but warns that a wealth tax could be “tough to implement”;  tax expert Arun Advani, by contrast, views this kind of recurring wealth tax as "economically credible". 

Net zero by 2040. The Greens want to reach net zero by 2040, phase out nuclear power (currently generating ~15% of the UK’s electricity) and massively scale up wind (both onshore and offshore) and solar power. They want an additional £40bn of green investment per year (including insulating homes and public buildings), accompanied by greening the Bank of England’s mandate. Positive Money’s Simon Youel notes this could include the BoE undertaking “green overt monetary financing” as an alternative to quantitative easing, buying zero-interest-bearing perpetual bonds from the Treasury to finance government deficit spending on green projects. The Greens also have an interesting plan to establish "regional mutual banks to drive investment in decarbonisation and local economic sustainability". These would be funded through a 'Co-operative Development Fund,' using resources from the UK Infrastructure Bank (UKIB) supplemented with another £10 billion of public money. 

Other interesting policies. The Greens want to let councils impose rent controls and to ban no-fault evictions in England, following their experience introducing a 3% rent cap in Scotland in coalition with the SNP. They also want to scale up social housing massively (from 30,000 new homes built between 2019 and 2023) by building 150,000 social homes a year and ending Right to Buy. They would rejoin the EU “as soon as the domestic political situation is favourable”. They aim to re-enter the Customs Union first and restore the free movement of people, especially for students. They also plan to nationalise railway, energy and water firms, propose a maximum 10:1 pay gap ratio for public and private companies, and eventually want to “move towards” a four-day week. 

Scottish National Party: “A Future Made in Scotland.”

The SNP’s focus is on Scottish independence and devolution of fiscal powers to Scotland. After gaining full authority over taxes, the SNP would impose a windfall tax on companies with excess profits and crack down on tax avoidance and evasion. They also want to scrap the UK government fiscal rules, introduce a Public Sector Net Worth rule to recognise the value of investment in public assets. One of the manifesto’s largest revenue-raisers is creating higher income tax bands in England and Wales, to match Scotland’s current system. This has the dual benefit of raising £16.5bn and applying exclusively to constituencies where the SNP are not standing.

Just transition. The SNP demand that Westminster devolves new borrowing powers to invest in a just transition. They would allow new oil and gas licences in the North Sea as long as they meet ‘climate compatibility tests’. (Note that many climate scientists argue that no new fossil fuel extraction can happen if we’re to achieve net zero by 2050). They  would also call on the UK government to invest at least £28bn a year in the green economy, and to take equity stakes in future energy projects.

Other interesting policies. The SNP would scrap the two-child benefit cap (read our analysis here) and legislate for an ‘essentials guarantee’; that would mean social security payments would always be  enough to cover basics like food and utilities. They would also introduce a “Keep the NHS in Public Hands” bill ruling out further privatisation of the NHS.

Reform: “Our economy needs reform.”

The top lines of the Reform manifesto are a swathe of tax cuts funded through various of cost-saving policies. Reform want to abolish inheritance tax for estates worth less than £2m, raise the personal tax allowance to £20,000, create an Employee Immigration Tax to levy 20% of National Insurance on foreign workers and change a variety of other business taxes. The money will come largely from cuts to public spending, which Reform argue will not impact services since every government department will becoming 25% more efficient by cutting bureaucracy and negotiating better value procurement deals. Other sources of savings include scrapping net zero (which they say will save the public sector £30bn over the next 25 years – though the OBR has forecast that doing nothing to mitigate climate change will cost the government more than it saves in the long run), raising taxes on renewable energy and stopping paying interest on government debt issued as part of quantitative easing and held by commercial banks to save £35bn a year; read NEF’s paper for more on the latter. Interestingly for a right-wing party led by an avowed Thatcherite, Reform also want to bring 50% of utilities into public ownership, with the other 50% held by pension funds, and propose new regulation to cap standing charges.

Plaid Cymru: “For fairness, for ambition, for Wales.”

Plaid Cymru’s manifesto calls for devolution of similar fiscal powers to those Scotland currently enjoys, giving the Senedd the power to set income tax bands independently of Westminster. They want to extend the windfall tax on energy companies, equalise capital gains with income tax and introduce a wealth tax alongside a variety of other revenue raisers. They also want to devolve all powers over energy and control of the Crown Estate to Wales, so the Welsh government can profit from offshore wind projects. Other plans include creating a Welsh national energy company to expand community-owned energy and introducing a social tariff.

Community Wealth Building. At the heart of Plaid’s economic strategy is community wealth building, a policy package pioneered by the Centre for Local Economic Strategies (CLES) and others to keep more money local areas and use public spending power to promote dense local supply chains and reshape local economic development. They want to reform the Development Bank of Wales so it can take – and profit from – more shares in emerging businesses and infrastructure projects; give the Welsh government the power to develop a community bank; target 75% of Welsh public-sector procurement coming from companies located in Wales; and promote co-operative employee and community ownership models in local growth industries like renewable energy. 

Other interesting policies. Plaid want to remove all benefit sanctions (see NEF’s case for ending benefit conditionality) and pilot Universal Basic Income (See Autonomy Institute’s work on Welsh UBI trials for more.)

Weekly Updates

Election Roundup

Feminist economics for the next parliament. The Women’s Budget Group has compiled a series of briefings for the general election on women's economic inequality in the UK, including suggested questions for parliamentary candidates. The briefings cover gender-related health inequalities; maternity, paternity and parental leave; early education and childcare, and more.

Will Labour put up taxes? The Financial Times’ Chris Giles suggests that Labour might be “telling the truth” about not increasing taxes in this next budget – and that it may not even need to. We covered Labour’s economic pledges earlier this week. 

The cost of austerity. Any incoming government thinking about introducing austerity measures may want to read a new LSE paper which finds that there were 190,000 excess deaths directly linked to the austerity cuts from 2010 to 2019, representing a 3% increase in mortality. 

Popular policies. A new YouGov poll ranks manifesto policies by popularity, with Lib Dem pledges accounting for eight of the top ten. The Greens’ wealth tax policy scores very highly, with 71% support, while the Conservatives’ proposed cut to National Insurance is relatively unpopular, with less than 50%. 

Ending economic stagnation. A group of leading economists – including three Nobel prize winners, Joseph Stiglitz, Sir Christopher Pissarides and Sir Angus Deaton, and a former Bank of England Deputy Governor, Sir Charles Bean, and others – have signed a letter calling for structural economic reforms to end ‘investment-sapping uncertainty’, reform of the planning system, improving trade relations with the EU and speeding up the transition to net zero. They say Labour offers a ‘credible economic alternative’ to end the UK’s stagnation.

Bond markets want more public investment. Fund managers have suggested the next government could raise extra money for investment from bond markets “without causing a Liz Truss-style gilts crisis”, according to the FT: “bond investors said the market could be forgiving if a new government decided to boost borrowing and amend its debt rules, provided funds were channelled towards measures to stimulate the economy.”