Hello readers, welcome back to my blog. Given the significance of some of the content in last week’s releases of political manifestos, I thought it would be a useful exercise to analyse some key issues that emerged from this and, ultimately, look at the economic theory behind these. I will focus on just two parties- labour and conservatives and will compare and contrast different policies as well as use some figures to support the arguments. I hope to summarize and present the key points from these two parties so that by the end of reading this you are aware of what Mrs. May and Mr. Corbyn are planning to do.
The Labour Party:
Scrap Tuition Fees:
- Labour says it will bring forward its pledge to scrap tuition fees to include students starting university in England this autumn if it wins the election. The party also says students partway through their courses would not have to pay for the remaining years. It said the cost was factored into the £9.5bn annual bill for scrapping fees.
- The Tories said more poorer students than ever were going to university, and that there are already suitable bursary schemes in place for those on low incomes.
- Labour said the £9.5bn annual cost of abolishing tuition fees would be paid for by increasing corporation tax, and income tax for people earning over £80,000.
- The 50p income tax rate will be introduced at a threshold of £123,000, while those earning more than £80,000 will be subject to a 45p rate, raising an additional £6.4bn from high earners.
In theory, higher taxes will help reduce income inequality and will reduce the gap between rich and poor. However, higher taxes could lead to a greater incentive to evade them and may reduce the incentive for people to work harder and work their way to the top since they don’t want to enter the next tax bracket. This can worsen productivity, which is already low in the UK.
Workers Rights and Democracy:
- Day-one rights . Labour would give all workers equal rights from their first day of employment, regardless of whether they were full-time or part-time, permanent or temporary.
- No more zero hours contracts . The party would ban zero hours contracts, guaranteeing every worker a minimum number of paid hours. Labour would also strengthen the law so that those who work short hours for more than 12 weeks on a regular basis will have the right to a regular contract, which reflects those hours.
- Post-Brexit employment rights and foreign workers- Labour would legislate to ensure that employers recruiting workers from abroad do not undercut workers at home. Corbyn has also pledged to replace the proposed Great Repeal Bill with the EU Rights and Protections Bill, which would safeguard workers’ rights handed down from the EU.
- A new living wage for all . Labour says it will raise the minimum wage to the level of the “Living Wage (expected to be at least £10 per hour by 2020)”. This would apply to all workers aged 18 or over.
- No more unpaid internships
- Abolish tribunal fees
- Double paid paternity leave
- Lowering the voting age to 16.
Banning zero hour contracts, although may increase job security for many people can be damaging to others where a zero hour contract is ideal. E.g. someone who wants to choose when and how much they want to work, like a student or part time parent and thus what might be more effective is stricter controls on such contracts rather than a complete ban. Labour has also provided some clarity as to what will happen to EU workers as a result of Brexit.
Labour has also announced that if it did win the general election it would raise the minimum wage to at least £10 by 2020. Although this means that people receiving minimum wage would see an increase in their disposable income and may perhaps have a higher incentive to work more hours, it could actually lead to unemployment if firms and businesses cannot afford to pay their workers this amount. This would be an unintended consequence and if businesses did start to lay off workers it would increase the demand for Job seekers allowances and unemployment benefits, therefore, costing the taxpayer more.
One other point is that labour has stated that it will double paternity leave pay. Although this benefits the individual again, it would mean that businesses would face higher costs and this may result in them increasing their costs to compensate for this. It could also lead to discrimination in the workforce, as businesses may choose someone who is not likely to go on leave than someone who is.
- Deliver safe staffing levels and reduce waiting lists
- End hospital car parking charges
- One million people will be taken off NHS waiting lists by “guaranteeing access to treatment within 18 weeks”
- Scrap NHS pay cap
- NHS will receive more than £30bn in extra funding over the next parliament
- Mental health budgets will be ring-fenced, and Labour will ensure all children in secondary schools have access to a counseling service.
Increased spending on the NHS means a tax rise is inevitable and middle/upper-class households will be affected most. Although it may seem fair to tax the rich not everyone in this category can afford these increases in tax unless they undergo significant lifestyle reforms.
The Conservative Party:
- Pump an extra £4bn into schools by 2022
- Scrap free school lunches for infants in England, but offer free breakfasts across the primary years.
- End ban on grammar schools – conditions would include allowing pupils to join at “other ages as well as eleven”
Scrapping free school lunches is controversial as young children are the ones being affected since families may not be able to give their children money for lunch.
- Real terms increases in NHS spending reaching £8bn extra per year by 2022/23
- A new GP contract and changes to the contract for hospital consultants
- Retain the 95% four hour A&E target
- Require foreign workers and overseas students to pay more to cover the cost of NHS care.
Even with this additional money, the NHS will have to find unprecedented levels of efficiency savings within five years just to break even.
Migration and Brexit:
- Exit the European single market and customs union but seek a “deep and special partnership” including comprehensive free trade and customs agreement
- Vote in both Houses of Parliament on “final agreement” for Brexit
Theresa May admitted a few weeks back that the first set of negotiations were not as successful as she had hoped. There is still uncertainty as to where the UK is headed in terms of trade agreements.
- A pledge to spend at least two percent of GDP on defense and increase the budget by at least 0.5 percent above inflation in every year of the new parliament.
- A pledge to “maintain” the overall size of the armed forces, retain the Trident continuous-at-sea nuclear deterrent.
Corbyn, on the other hand, has said that: “I want to achieve a nuclear-free world through multilateral disarmament, through the nuclear non-proliferation treaty.” He believes that the money spent on nuclear defense is unnecessary and what is needed is more money into the NHS and local police forces.