John McDonnell, the Labour Party politician and Shadow Chancellor of the Exchequer, leads the pack in looking smug when he says that Labour had their budget costed at the last Election. Most of the rest of the Shadow Cabinet also laud this fact with great self-satisfaction.
As any business person and civil servant knows, business plans are not gospel. They are a point in time perspective on a business and a set of financials. They are generally inaccurate. Companies that repeatedly deliver what they forecast are rare. The idea that Labour have suddenly created a financial bible that will deliver exactly what they say, at the price they say, is ridiculous.
The Labour party numbers are dripping in caveats and abstract concepts. There is no certainty in them at all. No-one should believe for one moment that their policies are comprehensively costed. And this is not a party political message, I have no more faith in any of the other parties being able to budget their manifestos accurately.
But it is fair to say that many of the Labour policies are still un-costed including breaking down the cost of nationalising each industry, or putting a price tag on other major capital projects such as extending HS2 to Scotland.
In addition their plan is based on certain assumptions that are unlikely to happen, if history is any form of precedent:
- For example they will not make Corporation tax deliver another £19.4bn by raising the headline rate to 21% from 2018-19, 24% from 2019-20 and £26% from 2020-21. It never does. In fact the correlation works the other way.
- They have no actual plan to deliver the £6.5bn that they reference from tax avoidance.
- They assume that they can raise another £6.4bn of income tax from increasing tax on the top 5% of earners, but quite often the very rich get mobile and avoid the tax.
- Estimates that an “excessive pay levy” would raise £1.3bn or that introducing a new financial transactions tax would bring in £5.6bn are again speculative at best.
The really scary thing, is that in today’s politics, the idea that a major political party has a “costed” budget, is even news. Of course political parties should forecast what they are going to spend to achieve their aims. It is also scary that so many people believe their figures are the gospel truth. If anything what it demonstrates is how big a gap there is between most politicians and most business people. Let’s hope that the reality doesn’t end up being a big shock for everyone, if their budget is every tested properly in government.