LONDON — With the 2017 general election just over two weeks away, the manifestos of all major political parties are being closely scrutinised by voters and journalists alike.
The documents set out the parties’ plans for the next five years in the UK, as the country steers through the uncharted waters of Brexit.
While Brexit is the biggest issue facing the country today, policy must still be created on everything from the economy to education to ensure that Britain continues to run smoothly as its leaves the European Union.
Last week Business Insider took a look at the key economic and fiscal policies put forward by the three biggest parties operating across the UK, examining their approach to taxation, wages, and the deficit.
On Monday, Andrew Goodwin, lead UK economist at Oxford Economics, circulated a note to clients examining the potential impact Tory, Labour, and Lib Dem policies could have on the British economy. Goodwin distilled the impact into key charts focusing on three indicators of the economy’s health.
First up, GDP growth:
Goodwin says (emphasis ours):
“The more expansionary fiscal plans of Labour and the Liberal Democrats would boost both demand and supply, yielding stronger outturns for GDP growth compared with the Conservatives. By the end of 2021-22, the level of GDP is 1.9pp higher under the Liberal Democrat plan than under the Conservatives’ proposals, while under the Labour approach, real GDP would be 1pp higher than under the Conservatives’ proposals. It is possible that these results are understating the potential gains under Labour.”
Next, take a look at how the cost of the UK’s sovereign debt will change under a blue, red, or yellow government:
“The combination of stronger growth and higher borrowing means that gilt yields are higher under Labour and the Liberal Democrats than under the Conservatives,” Oxford says in its analysis.
“Our model-based scenario suggests that financing Labour’s renationalisation programme could push up gilt yields by 75bp but we think this probably overstates the impact given the strength of downward pressure on yields from structural factors.”
The final area of interest for Goodwin and his team is how public debt will fall under the economic plans of the three main parties. The impact of Labour’s plans is the most uncertain given the lack of costings for its huge renationalisation plans, Goodwin notes.
“There is significant uncertainty around the timing and cost of Labour’s mooted renationalisation programme and it is also unclear how the ONS will classify the asset purchases,” he writes.
“If it adds to public sector net debt, Labour will find it very difficult to comply with its rule on debt. But if it does not add to net debt, it would achieve its rule (as would the other two parties).”
Here is the chart (note the two different lines for Labour):