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Tue, 31 March 2020

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Boris Johnson's pledge not to raise key taxes is 'bad policy-making Tories may come to regret', warns IFS

Boris Johnson's pledge not to raise key taxes is 'bad policy-making Tories may come to regret', warns IFS
2 min read

A Tory pledge not to increase income tax, VAT or National Insurance contributions has been criticised by a leading think tank.


The Institute for Fiscal Studies said the Conservatives "may come to regret" the promise, which is contained in the party's election manifesto.

In its first assessment of the Tory document, the IFS said the tax "triple lock" unveiled by Boris Johnson could put a "constraint" on Chancellor Sajid Javid.

IFS director Paul Johnson said: "It is also part of a fundamentally damaging narrative – that we can have the public services we want, with more money for health and pensions and schools – without paying for them. We can’t."

Overall, Mr Johnson - who last week warned that Labour's pledge to massively increase spending through tax rises on companies and the well-off was "not credible" - said the 64-page Conservative manifesto was "modest" in its ambitions..

"As a blueprint for five years in government the lack of significant policy action is remarkable," he said.

But the IFS chief warned that the long-running Conservative spending squeeze was likely to continue in other areas of government.

"Health and school spending will continue to rise," he said. "Give or take pennies, other public services, and working age benefits, will see the cuts to their day-to-day budgets of the last decade baked in."

The think tank said the Conservative manifesto added "just £2.9 billion" to current spending plans by 2023-24, while leaving "little scope" for further spending increases.

IFS deputy director Carl Emmerson said the tax freeze pledge was "not good policymaking".

"Should a structural hole appear in the public finances, it might be deemed necessary to increase taxes," he said.

"While there are plenty of other ways in which additional revenue could be raised, previous Conservative Chancellors have on occasion deemed increases in rates of NICs or VAT to be a reasonable way to raise large sums.

"This commitment would also make it harder to deal with the concern that the tax system – particularly National Insurance – under-taxes self-employment relative to employment, as [former chancellor] Phillip Hammond found when he tried to address this issue."

The IFS, which is due to give a detailed verdict on both party's manifestos later this week, has already questioned Labour's policy pledges, with the think tank warning that the party's latest plan to plan to compensate millions of women hit by the state pension age rise "drives a coach and horses" through its existing spending proposals.

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