Pay squeeze could cost Treasury more than £100bn, say Labour calculations
The Treasury will lose more than £100bn in revenue if wages growth is as much below forecast in the next parliament as it has been in this parliament, according to calculations released on Tuesday by Labour.
Income tax receipts and national insurance contributions have been 6.9% lower across the parliament than expected in 2010, equivalent to £95bn. The same level of shortfall in the next parliament would deprive the Treasury of £109bn in revenue, the party says.
By contrast, if wages were to grow in line with their historical average rather than their current forecasts over the next parliament, tax receipts would be almost £12bn higher than the Office for Budget Responsibility is predicting.
Labour is highlighting the sensitivity of the public finances to wages in an attempt to strengthen its argument that the deficit can be cleared much more easily if wages do not remain depressed. The Labour figures come as the Tories hope to skewer Ed Balls by insisting that if he votes in the Commons today for the coalition’s charter of fiscal stability, as the shadow chancellor plans, he must be committing Labour to an extra £30bn in borrowing or taxes.
The Conservatives make the claim on the basis that if Balls supports the government timetable of eliminating the structural deficit by 2017-18, but refuses to accept the required spending cuts, he must either raise taxes or borrowing.
The chancellor, George Osborne, said: “Labour are in a chaotic position. If they vote for the charter and do not accept that £30bn consolidation is required then they are promising a tax bombshell because they accept our spending plans. If they vote for the charter but reject the need for £30bn consolidation then they are pretending they don’t want to borrow or spend more when nothing has actually changed.”
The Conservatives regard the vote, and surrounding debate on the charter, as critical to undermining Labour’s credibility on the economy.
The Tories intend to focus remorselessly on the economy in their general election campaign, even to the extent of not including the NHS or immigration among their six priorities.
Polling by ComRes for ITN on Monday showed the NHS has overtaken immigration as the top concern for voters for the first time since tracking began in July 2014. Half of Britons now list the NHS as one of their top three priorities, up by 11 points from 39% last month. Immigration is a top three concern for 46% of the public, down from 49% in December and from 52% in September.
Meanwhile, reducing the government deficit is cited as a top three issue by 19 % of voters.
Balls will argue Labour can vote for the charter on the basis that it does not set a fixed date of 2017-18 by which the deficit is eliminated, but says it must be eliminated on a rolling three-year programme.
Aides to Balls also point out that the charter simply states the aim is to eliminate the deficit by 2017-18 and does not set a binding goal.
Balls is also likely to challenge the Lib Dems to explain why their senior figures have condemned Tory plans when the underlying spending assumptions were signed off by four senior ministers including Nick Clegg and the Treasury chief secretary, Danny Alexander.
Income tax receipts and national insurance contributions have been 6.9% lower across the parliament than expected in 2010, equivalent to £95bn. The same level of shortfall in the next parliament would deprive the Treasury of £109bn in revenue, the party says.
By contrast, if wages were to grow in line with their historical average rather than their current forecasts over the next parliament, tax receipts would be almost £12bn higher than the Office for Budget Responsibility is predicting.
Labour is highlighting the sensitivity of the public finances to wages in an attempt to strengthen its argument that the deficit can be cleared much more easily if wages do not remain depressed. The Labour figures come as the Tories hope to skewer Ed Balls by insisting that if he votes in the Commons today for the coalition’s charter of fiscal stability, as the shadow chancellor plans, he must be committing Labour to an extra £30bn in borrowing or taxes.
The Conservatives make the claim on the basis that if Balls supports the government timetable of eliminating the structural deficit by 2017-18, but refuses to accept the required spending cuts, he must either raise taxes or borrowing.
The chancellor, George Osborne, said: “Labour are in a chaotic position. If they vote for the charter and do not accept that £30bn consolidation is required then they are promising a tax bombshell because they accept our spending plans. If they vote for the charter but reject the need for £30bn consolidation then they are pretending they don’t want to borrow or spend more when nothing has actually changed.”
The Conservatives regard the vote, and surrounding debate on the charter, as critical to undermining Labour’s credibility on the economy.
The Tories intend to focus remorselessly on the economy in their general election campaign, even to the extent of not including the NHS or immigration among their six priorities.
Polling by ComRes for ITN on Monday showed the NHS has overtaken immigration as the top concern for voters for the first time since tracking began in July 2014. Half of Britons now list the NHS as one of their top three priorities, up by 11 points from 39% last month. Immigration is a top three concern for 46% of the public, down from 49% in December and from 52% in September.
Meanwhile, reducing the government deficit is cited as a top three issue by 19 % of voters.
Balls will argue Labour can vote for the charter on the basis that it does not set a fixed date of 2017-18 by which the deficit is eliminated, but says it must be eliminated on a rolling three-year programme.
Aides to Balls also point out that the charter simply states the aim is to eliminate the deficit by 2017-18 and does not set a binding goal.
Balls is also likely to challenge the Lib Dems to explain why their senior figures have condemned Tory plans when the underlying spending assumptions were signed off by four senior ministers including Nick Clegg and the Treasury chief secretary, Danny Alexander.
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