Which of the parties will make you richer?

Share Button

At the end of the day it’s what most people want to know, isn’t it? Who should I vote for to make me and my family better off?

Sky News economics editor Ed Conway attempts to answer that in eight charts:

Who will make me richer?

Election

Let’s start with the question many of you will be asking: which party will leave me and my family better off?

The answer here is, I’m afraid, a little depressing. The short answer is that the tax and benefit plans contained in the party manifesto plans will all mean average net incomes will fall across the country, whoever wins the election.

The first thing to bear in mind is that the existing government plans will take 1.6% off the average net income over the course of the Parliament.

The Lib Dem plans imply a 1.2% fall, the Conservatives a 1.6% and the Labour plans a 2.1% fall.

Rich v poor

Election

Of course, those numbers are overall averages, but underneath the surface, different households will face vastly different fates.

Consider the fate of the bottom 10%, whose income impact across the Parliament you can see on the left-hand clump of bars on this chart.

They are currently facing a 9.3% fall in net incomes as a result of existing government plans – in large part due to the freeze on working age benefits.

It turns out that this bottom tenth would see an even bigger negative impact on their incomes if the Tory manifesto was implemented: a 9.5% fall.

But perhaps the most striking thing here is that it is the Lib Dem, rather than the Labour, manifesto which most mitigates the income impact for the poorest.

The poorest 10% would see 3.2% fall in incomes under the Lib Dems, and more than double that – 7.2% – under Labour.

That comes back to the fact that while Labour is proposing spending a bit more on welfare, it is not reversing the benefits freeze – at least according to its manifesto.

It is striking, too, that the only income group to see a rise in this chart is the richest, if the Tories win – while Labour’s extra taxes on the wealthiest would mean they would face a 3% fall under Jeremy Corbyn’s plans.

But bear in mind, whoever wins the election, it will be the poorest, not the richest, who face the biggest falls in their incomes.

Education, education, education

Election

It is worth saying, though, that those projections, from the Institute for Fiscal Studies, don’t take into account the possibility that the country as a whole could prosper or suffer, depending on how well the wider economy does.

From that perspective, things like education spending matter.

In theory, better education systems should improve a country’s long-term productive potential.

This chart shows you the UK parties’ plans for schools spending (actually secondary schools).

A couple of things jump out.

First, that spending per pupil is due to carry on falling under the Conservatives (note this is quite different to overall spending, which is rising).

While Labour has made much of its extra cash infusion into the schools system, it’s also striking that its plans essentially mean spending plateaus, rather than increasing at the rate it did from 1997 to 2011.

The Lib Dem plans are more or less in the middle (you’ll notice that is a recurrent theme).

And the NHS?

Election

So for NHS spending, each party has pledged extra money for the NHS: Labour the most, followed by the Lib Dems and then the Tories (though the amount the Conservatives spend could be more if they frontloaded their spend; the Tories have been far more vague than the other parties about their fiscal plans).

But, again, the overarching concern is that under all the parties, health spending remains far shy of where it would have been had the austerity of recent years not taken place.

Who will increase my taxes?

Election

In spite of all those cuts, the Government’s overall spending levels remain unusually high. That, in turn, means they have had to raise taxes to high levels.

Whoever wins this election, the tax burden – a measure of total tax revenues as a percentage of national income – is set to go to the highest level since 1969.

If Labour won, it would go up to the highest level since the postwar demobilisation period in 1949.

Whether Britons will be ready to pay such a large proportion of their incomes in tax remains to be seen.

Borrowing – it’s a thing

Election

Nonetheless, the chances are taxes may have to go even higher than in these projections.

After all, every party is planning to borrow more than the current official Government plans.

This is a striking departure – after all, the last election only two years ago was largely focused on deficit plans (remember all that stuff about a “long term economic plan”?).

This time around, even the Conservatives would still be borrowing considerable amounts (£7.5bn a year) by the end of the Parliament.

Yes: lower than we’re borrowing now, but still nowhere near that budget surplus (where spending is entirely covered by taxes) George Osborne had promised we would be nearing in the next couple of years.

Deficit record up for grabs…

Election

The upshot is that Britain is now in the midst of the longest period of unbroken deficits since the Napoleonic era.

This chart shows you the current records in terms of periods of continuous deficits.

As you can see, if Theresa May’s plan to eliminate the deficit by the middle of the next decade is successful, she will just about avoid breaking that Napoleonic record.

But under Labour’s plans, the UK would continue to borrow, and head into unprecedented territory in the coming years.

How to solve a problem like… the pensions crisis

Election

Finally, when it comes to the long-term health of Britain’s finances, apparently minor stuff like this chart matters – a lot.

The triple lock is the Government’s promise that the state pension will increase in line with earnings, inflation or 2.5% (whichever is highest) in the coming years.

The Conservatives said in their manifesto that they would switch to a “double lock” – meaning pensions going up by the highest of earnings or inflation.

But as you can see from the chart, the double lock would make very little difference to pensions affordability in the coming years.

Which rather raises the question: why incense prospective pensioners so much by including this in the manifesto when it alone will not solve the long-term pensions crisis?

Anyway, those are just a few of the key charts ahead of this election.

If you’ve got this far it means you have officially paid more attention to the important economic issues than many of our politicians seem to this election. Congratulations!

And good luck…

View original post here – 

Which of the parties will make you richer?

Leave a Reply

Your email address will not be published. Required fields are marked *