The Economic Battle Lines In The Manifestos

15th June 2024

The Resolution foundation had published the latest comparison of the manifestos for the election. Mike Brewer, Interim Chief Executive takes you through them highlighting the issues.

Labour's terrain - the workplace
Labour want you to notice that they're all about change. Their route to change doesn't lie in big, bold tax or spend pledges, but in lots and lots of reform - to the NHS, to our energy sector, and to our planning system, to name a few. But the reforms that stick out for me are a package of measures of employment rights and new labour market institutions that would amount to the biggest shake-up of the workplace in a generation.

The last big shake-up was back in 1997 was with the introduction of the National Minimum Wage, overseen by the Low Pay Commission. The minimum wage has been hugely successful in bringing hourly low pay down to its lowest level in over four decades, especially after it was ramped up and rebranded the National Living Wage by then Chancellor George Osborne. But tackling the wider problems affecting low-paid work is far from job done, as the chart below shows. Yes, hourly pay rates are up, but levels of work insecurity and volatility are still too high in many sectors, as is a lack of autonomy in jobs. It's these negative aspects of work that discourage people from doing jobs, or taking on more hours, as well as making working life fairly miserable for some.


One of the most eye-catching proposals was for a Fair Pay Agreement in social care. The manifesto details were light, but if you want an idea of what we'd like this to look like, then you can check out our proposals here.
Why start with social care? Because it's a sector in crisis - demand for care is only going to grow as Britain ages, and yet the sector is already beset by chronic shortages, with a vacancy rate of almost 10 per cent. Care workers love their jobs, as our research shows, but they're paying a price for that loyalty - working in one of the lowest paid occupations in Britain, as the chart below shows.

There are strong moral and practical reasons for boosting care workers' pay and conditions, and to drive up the quality of work more broadly. Labour is committed to announcing its plans in its first 100 days, but we shouldn't rush implementation - a big bang approach could be counter-productive. A key reason why the minimum wage has been so successful was its cautious introduction, and careful stewardship by the Low Pay Commission. These are the lessons an incoming Labour government should heed as it seeks to give workers welcome new rights and builds new labour market institutions.


The Conservatives’ terrain - tax

The Conservative Party’s pitch is that they are going to cut taxes in the next parliament, and that Labour aren’t. Central to this is a trebling down of 2p cuts to employee National Insurance - taking the main rate down from 13.25 per cent in September 2022 - before the Health and Social Levy was cancelled by Liz Truss – to just 6 per cent by the middle of the next parliament. Even more striking was the pledge to completely abolish NI for the self-employed.

There are clear differences between the parties’ tax plans. But taxes would still go up in the next parliament under these Conservative plans – the £17 billion of tax cuts in the manifesto are not enough to offset the Jeremy Hunt legacy of already-announced £23 billion of post-election tax rises. If we take their plans at face value (and as is explained below, they are dependent on making some extremely difficult welfare cuts), we’re now talking around £6 billion of tax rises under the Conservatives, and £31 billion under Labour by 2028-29 (£8.6 billion of their own, and the £23 billion from Jeremy Hunt).

Big numbers? Well, not really. The forecast rise in the tax-to-GDP ratio implied by Labour’s plans – equivalent to around £1,000 a year per household (compared to around £200 for the Conservatives) – would, at 0.9 percentage points, be similar in scale to the 2001-2005 parliament, which represents only just over a quarter of the far larger 3.6 percentage point rise that happened in the last parliament (equivalent to £3,600 a year per household).

But a word of caution on these tax cuts. The funding that lies behind them is far from rock solid. Saving £12 billion a year from disability benefits by the end of next parliament will be extremely challenging to deliver: the introduction of PIP back in 2013 ended up saving just 7 per cent of the sum that was originally expected to be saved by the end of the parliament. And HMRC’s task of cutting avoidance and evasion by £6 billion would be made a lot harder by the proposed abolition of NI for the self-employed. As the chart below shows, this policy would lead to a £6,400 tax gap between an employee and self-employed worker on £50,000 of market income. Will it encourage entrepreneurship? Not sure. Might it encourage employers to push the employee – self-employed boundary a bit further to minimize tax bills? I fear it could.

Read much more with graphs HERE