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FactCheck: a £34bn Tory black hole?

By Channel 4 News

Updated on 04 January 2010

Labour claims the Tories have made a bunch of unfunded spending pledges. We crunch the numbers.

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Alistair Darling (picture: Reuters)

The claim

"The Tories have made over £45bn of promises, but can barely explain how they can pay for a quarter of this. This leaves them with a credibility gap of £34bn."

Alistair Darling MP, Chancellor of the Exchequer, 4 January 2010

The background

The mince pies may have only just been cleared away, but on the first working day of 2010, Labour and the Tories have been firing pre-election salvos.

This morning Chancellor Alistair Darling launched a mammoth 148-page document detailing the Tories' promises to date, and the costs involved.

Labour reckons the Tories have promised more than £21bn-worth of straight tax cuts, £13bn-worth of changes to planned tax rises which have yet to kick in, and £11bn of spending commitments.

This adds up to more than £45bn of pre-election sweeties, but Labour say the Tories have only detailed how they will foot £11bn of the bill, leaving a black hole of £33.8bn.

Conservative leader David Cameron was quick to rubbish the plans, saying that he had found £11bn-worth of errors in 11 seconds, and dismissing the document as "complete junk".

And as we noted on the FactCheck Twitter feed this morning, even the first page seemed a bit fishy (details on how to follow us on Twitter here).

So does the document stand up? We look at a few points in more detail below.

The analysis

"[The Tories] have also said they would reverse planned tax increases in areas like national insurance, the new 50p top rate and pension tax relief, which raise £13.3 billion per year," claims the introduction to Labour's dossier.

National insurance increase

Labour has pencilled in an extra penny on national insurance from 2011, as part of an effort to reduce the bulging budget deficit. If the Tories don't put up National Insurance, there would be a whopping £28bn for them to find between 2011-12 and 2014-15 to plug the hole.

But have the Tories actually promised to scrap the tax increase?

The Labour document does contain some fairly strong quotes from George Osborne, who has said that avoiding the tax rise is his "number one priority". "That is something you can judge us on between now and 2011," he told The Times last month.

So it's not rubbish for Labour to highlight the fact the Tories have been showing a fair bit of leg on the idea that national insurance won't rise under them. But neither is this something the party has - yet - promised.

50p tax rate and pension tax relief

Labour also has the Tories down to scrap a planned 50p tax rate for those earning more than £150,000 a year - at a cost of £2.4bn a year. Labour has given its rivals the benefit of the doubt in its calculations, pencilling in the cut right at the end of the next parliament, in 2014-15. If they scrapped it a year earlier, the cost would double; two years earlier and it would triple, etc.

But the Tory line has been that they don't approve of this higher tax rate, but just don't have any spare cheques to cover its axing. The Tories have been careful not to make any firm promise, saying that they want to scrap it but not, even in the quotes Labour gives, that they will.

Labour is also planning to reduce pension tax relief for high earners - something economists think would help make the 50p tax rate more effective. Labour claims the Tories are "committed to reversing" this.

But again, although the party has attacked the plan, even the quote Labour cites in its document hardly smacks of a firm promise. Over to Theresa May, in a speech in May 2009:

"As George Osborne has already made clear, I am afraid that I am not able to stand here today and promise you that a Conservative government will reverse this measure. There are a number of new tax rises we don't agree with, but this one will have to take its place in the queue."

So Labour has signed the Tories up for billions of pounds worth of tax changes, on which the Conservatives dropped varying degrees of hints, but have yet to make a firm promise.

Tax cuts for married couples

Similarly the Tories have promised for a long time to "recognise marriage in the tax system". But details of how they will do this have yet to be announced.

Labour has used the cost of allowing married couples to share their personal tax-free allowances, a proposal outlined in a taskforce led by former Tory leader Iain Duncan Smith.

Although Labour has only pencilled this in for the final year of a Tory parliament, it is a pretty pricey way to recognise marriage.

But as Cameron said last month, this is not actually Tory policy. "There are all sorts of different ways of doing it," he told the Daily Mail.

Inheritance tax and non-doms

It's not just Labour's numbers start to crumble under scrutiny - the Tory defence isn't always squeaky clean.

The Conservatives have repeatedly claimed that their planned inheritance tax cuts (and less-vaunted stamp duty cuts for first-time buyers) would be funded by a flat-rate levy on non-doms - wealthy foreigners living in Britain but non-resident for tax purposes.

In fact, Cameron even cited this as an example of the Tories spending transparency during his press conference today.

But as we've described before, there's a lot of uncertainty about how much money a tax on these slightly elusive characters would raise.

The verdict

Detailed the Labour dossier may be, but it's doesn't mean it is watertight.

It's hard to conclude the Tories have £34bn of unfunded promises - we've noted just a few examples above where Labour has taken something the Tories have said they would like to do, and made assumptions on when or how they will do it.

Certainly, the Tories have been pretty careful not to promise to reverse some of Labour's tax rises on the basis that they don't know whether they would be affordable, but Labour has included them in the tally anyway.

That said, this doesn't mean the Tories have spelled out convincingly how they will implement and fund everything they have talked about - one example that leaps out being the proposed extra tax on non-doms, about which there is uncertainty at best.

The dossier's not gospel, but it's not, as Cameron said, complete junk.

We expect to return in more detail over the next few months to some of the specific costings and claims in the dossier. The election starting gun has been well and truly fired.

FactCheck rating: 3

How the ratings work

Every time a FactCheck article is published we'll give it a rating from zero to five.

The lower end of the scale indicates that the claim in question largerly checks out, while the upper end of the scale suggests misrepresentation, exaggeration, a massaging of statistics and/or language.

In the unlikely event that we award a 5 out of 5, our factcheckers have concluded that the claim under examination has absolutely no basis in fact.

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