I’m disappointed that Labour Party and Cooperative Party politician Ed Balls’ suggestion that the Office for Budget Responsibility (OBR) should audit the parties’ manifestos was never taken up, not least because we will never know what OBR’s chairman, Robert Chote, thinks of the Green Party’s claim that all its proposals are “fully costed”.
It’s quite something, the Greens’ manifesto. Their more reasonable measures include the “complete ban on cages for hens and rabbits” and the insistence that “UK taxpayers’ money is not used for bullfighting”. But the sheer scale of their financial profligacy is breathtaking. In total, the party estimates its proposals — which include doubling child benefit, jacking up the state pension to £180 a week and an extra £12 billion for the NHS — would increase public expenditure by £177 billion a year by 2020. But don’t be alarmed because, according to Natalie Bennett, a Green government would be raising an additional £198 billion a year in taxes by then. That’s right, the Greens are predicting a budget surplus by the end of the next Parliament.
For instance, they’d impose a two per cent annual levy on the net worth of anyone with assets over £3 million, so if you own a house worth £10 million you’d have to hand over £200,000. This “wealth tax” would generate £25 billion a year. The party also thinks it can raise £6.7 billion from an “unhealthy food tax”, £12.5 billion from raising corporation tax and £20 billion from a “Robin Hood tax.”
But that only gets you so far, so the Greens would raise a further £80 billion a year from abolishing capital gains tax allowances (£3.3 billion), increasing duty on alcohol and tobacco (£5.7 billion) and — of course — clamping down on tax evasion. That last measure is good for a whopping £30 billion a year.
Far be it from me to predict how a sober-minded economist might react to this ‘“costed plan”, but I imagine he or she would ask whether the Greens have factored in the “behavioural effect” these measures would in all likelihood give rise to. For instance, the party estimates that raising the top rate of tax to 60 per cent would generate an additional £2.3 billion. But that seems unlikely. According to the Treasury’s analysis, Labour Party politician Alistair Darling’s decision to raise the top rate from 40 to 50 per cent in his 2010 Budget yielded much less than the anticipated amount because of the “considerable behavioural response to the rate change”.
It’s not hard to imagine the “behavioural response” of high-net-worth individuals to taxing their assets by two per cent a year, or of investment banks to a “Robin Hood tax.” They’d relocate offshore as soon as possible, not withstanding the new Green tariff on air travel (£16 billion).
Of course, the reason no serious economist has subjected the Green Party’s policies to a forensic analysis is because no one expects Natalie Bennett to be the next PM. The nearest we got to that was radio presenter Nick Ferrari’s cross-examination of her on London Broadcasting Company, an interview in which she was unable to answer a single question about how her proposals would be funded.
Yet, incredibly, some five per cent of the population say they’re going to vote Green on May 7. Until recently I assumed that these people were complete nutjobs, but I sat next to a level-headed Oxford graduate at a dinner party the other day who told me she was a member of the party. Will she change her mind after reading the Green manifesto? I’d love to think so, but I doubt it.
By arrangement with the Spectator
