Labours Election Manifesto Full of Promises But Missing Spending Cuts or Tax Rises

By: Nadeem_Walayat

The Labour party launched its election manifesto today that in great detail listed a string of promises to increase spending and not to increase income tax.

Key Manifesto Points

• Halve the annual deficit of £167 billion
• NO increase in Income Tax
• An internationally agreed Bank tax
• Sell off nationalised banks
• Health reforms to make the NHS far more accountable to the patients it purports to serve
• A myriad of minor spending promises amounting to at least £2 billion a year.

What's Missing from the Labour Manifesto

The key element missing is how Labour will fill the £167 billion black hole in the countries finances. The promise of halving the deficit from £167 billion to about £80 billion will require at least £30 billion of spending cuts and £50 billion of tax rises. A rise in VAT to 20% would bring in an estimated £25 billion a year, which still leaves £25 billion hole in Labours un costed promises.

The government's annual budget deficit is running at £167 billion a year or at 25% of the total budget i.e. the the governments total revenues are £510 billion against estimated expenditure of £677 billion, hence a deficit of £167 billion added to the national debt known as the Public Sector Net Debt (PSND) currently standing at about £809 billion, though excluding the hidden tax payer liabilities that extend to several more trillions of pounds. Nevertheless £809 billion of debt would cost about £33 billion in interest per year to service this debt, as the debt grows so does the cost of servicing the debt, more so as the supply of government bonds increases then so will the market demand ever higher interest rates to buy this flood of debt which illustrates why running anywhere near an £167 billion annual budget deficit is NOT sustainable, as it would ignite the earlier mentioned inflationary debt spiral as interest payments soar which therefore requires urgent action to CUT the deficit to BELOW 6% of GDP / £75 billion, with £102 billion necessary to be cut comprising of tax increases, economic growth and spending cuts in the region of £60 billion.

Source:

By Nadeem Walayat

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Nadeem Walayat has over 20 years experience of trading derivatives, portfolio management and analysing the financial markets, including one of few who both anticipated and Beat the 1987 Crash. Nadeem's forward looking analysis specialises on UK inflation, economy, interest rates and the housing market and he is the author of the NEW Inflation Mega-Trend ebook that can be downloaded for Free. Nadeem is the Editor of The Market Oracle, a FREE Daily Financial Markets Analysis & Forecasting online publication. We present in-depth analysis from over 500 experienced analysts on a range of views of the probable direction of the financial markets. Thus enabling our readers to arrive at an informed opinion on future market direction. http://www.marketoracle.co.uk

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