The Tory party’s magic money tree is growing out of control, with both Boris Johnson and Jeremy Hunt pledging to spend tens of billions of pounds if they become prime minister. But any form of Brexit will mean less money than if we stay in the EU. Leave with no deal and out comes the axe.
Let’s quickly recap some of the spending promises each candidate has made. First, frontrunner Johnson.
- Raising the threshold of the 40% income tax rate from earners on £50,000 to £80,000. This would cost £9 billion a year.
- Lifting the national insurance contributions (NICs) threshold for those on low incomes. This would cost government at least £3 billion per year for every £1,000 the threshold is raised, according to the Institute for Fiscal Studies (IFS). Matching the current income tax threshold (£12,500) would cost £11 billion per year.
- Abolishing stamp duty on homes under £500,000. That would deprive government coffers of £2.2 billion per year.
- Increase per capita funding for school kids with a package worth £4.6 billion per year.
- An extra 20,000 police on the streets – the hiring spree alone will cost £1 billion over three years.
- Universal full-fibre broadband, which industry figures say could cost £30 billion.
- A plan to “reboot” the Northern Powerhouse Rail project. Johnson says this idea needs to be “taken from the realm of generality and made particular”, but it is similar to another – perhaps more ambitious – policy which was costed at £100 billion.
- Johnson ally Matt Hancock said the new prime minister would “show some love” for public sector workers. Johnson has only publicly committed to “decent pay”.
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Hunt is also racking up the spending promises.
- Cut corporation tax to 12.5% and take 90% of high street businesses out of rates. His overall package of business tax cuts would cost around £13 billion per year in the short run. The IFS says this is “not a tax cut that would pay for itself”.
- Raise NICs threshold (see above).
- Double defence spending as a proportion of GDP (from 2% to 4%) over the next decade. At current levels, that would be another £40 billion a year.
- Cut interest on student loans. This would cost about £1 billion per year in the long run. It will only affect the top 30% highest earners with student debt, says the IFS. Hunt also wants to cancel student debt for entrepreneurs.
- £6 billion to mitigate the impact of a “no deal” Brexit on UK farmers and fisheries.
Both candidates say they’ll fund their bonanzas from the £22-25 billion of “fiscal headroom” that Philip Hammond has set aside in case we crash out. This is nonsense. The chancellor’s “war chest” is a one-off sum of money whereas most of Johnson’s and Hunt’s promises involving spending money year in, year out.
What’s more, if we crash out of the EU with no deal – where both candidates are heading – our economy will suffer. It will up to 9% smaller than it otherwise would have been, costing £100 billion a year by the 2030s, according to the National Institute of Economic and Social Research.
The money needed for any new prime minister’s spending plans will be swallowed up by a Brexit black hole. We will have less money, not more. The only way to make sure we have the money we need to fix Britain is to stop fixating on Brexit and stay in the EU.