“Labour would ruin our public finances [...] Labour’s plan forms a £90 billion black hole, costing your household an extra £3,300 per year.”
“The Labour party [...] at the last count has made £90 billion of unfunded spending commitments.”
The Conservative Party and senior Conservative politicians have repeatedly claimed in recent weeks that the Labour Party has made unfunded spending commitments totalling £90 billion.
Conservative Party chairman Greg Hands MP was quoted by the Evening Standard on 27 February as saying Labour’s economic plans included £90 billion in “unfunded spending”.
This figure has also been referenced by the Prime Minister Rishi Sunak, who in Parliament on 11 January said that Labour “at the last count has made £90 billion of unfunded spending commitments”, and foreign secretary James Cleverly. It was also the subject of a video, tweet and web page published by the Conservative Party last month, which claimed that Labour’s spending commitments would leave a “£90 billion black hole” in public finances.
The £90 billion figure is based on the Conservatives’ estimate of the total net cost of various policies announced by the Labour Party since 2021. However, it’s not a reliable estimate of what a Labour government would actually mean for public finances, because it’s calculated from a mix of annual and one-off costs, it’s unclear if Labour still plans to implement all the policies, and some individual policy costings appear to be out of date.
When politicians and political parties make broad estimates, it’s important they are clear about what calculations they’ve done and the limitations of any figures they quote.
It’s also important that politicians and political parties are prepared to publicly back up what they say with evidence. The Conservative Party did provide detail on its calculations when we asked it, as set out below.
On the other hand, while Labour has repeatedly insisted that all its manifesto policies will be fully costed and fully funded, it did not respond to repeated queries from Full Fact as we wrote this fact check about various policy costings or whether it still stood by all the previously-announced pledges included in the Conservatives’ estimate, some of which were made before its “fully funded” commitment. As a result, we’ve not been able to confirm what Labour believes its policies would actually cost.
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The Conservative Party doesn’t appear to have published its underlying calculations for the public to see, but it shared its analysis with Full Fact when we asked about the £90 billion figure.
That analysis estimated that 16 different policies proposed or supported by Labour since 2021 amount to a total of approximately £151.4 billion in spending commitments. Cost estimates for individual policies ranged from £41 billion for Crossrail 2 to an extra £80 million a year on dementia research.
The analysis also estimated that five revenue-raising policies announced by the party over this period would bring in approximately £58.7 billion. The Conservatives then subtracted this figure from its estimate of the total cost, to reach a figure of £92.7 billion for what it described as “unfunded spending commitments”, which it then rounded down to £90 billion.
This article isn’t a comprehensive analysis of the Conservatives’ calculations. Based on the information we do have though, the £90 billion figure isn’t reliable, for reasons outlined below.
However it’s not clear if the figure could be an overestimate, an underestimate or broadly right—we simply don’t have enough information to attempt to produce a reliable alternative figure. It is true that, despite Labour having repeatedly said that its policies will be fully costed and fully funded, with some policies the party has previously announced this hasn’t appeared to be the case.
The Labour Party has not responded to our requests to confirm details of its various policies, and nor have shadow chancellor Rachel Reeves, shadow health secretary Wes Streeting or shadow secretary of climate change and net zero Ed Miliband, who we contacted to ask about policies relating to their individual briefs. As a result we’ve been unable to verify many of the individual figures included in the Conservatives’ estimate.
One problem with the Conservatives’ estimate is that it’s calculated from a mix of annual and one-off figures. When the Conservatives have quoted the £90 billion, they’ve not specified if it’s intended to be an annual or a total estimate. But either way, using a combination of annual and total costings makes any final figure unreliable.
For example, the analysis claims Labour would reintroduce the target of spending 0.7% of gross national income on foreign aid, at a reported additional annual cost of £5 billion (Labour shadow foreign secretary David Lammy, who did respond to our queries, told us his party was committed to this target, but would not set a specific timeframe for reintroducing it, which is similar to the current government policy).
This £5 billion cost is only counted once, whereas for other policies the total cost is included despite the budget for these projects being likely to be spread over a number of years. For example, the figure used in the analysis for the development of Crossrail 2 of £41.3 billion is based on the total estimated cost for the project between 2023 and 2038. Similarly, the cost listed for the development of “an Elizabeth line for the North” is listed as £18 billion, citing the reported total cost of building the original Crossrail in London over more than a decade (though the National Audit Office estimates this cost to be closer to £19 billion).
Annual figures are used for revenue-raising policies such as scrapping the charitable status of private schools and non-dom tax status, which the analysis estimates will raise £1.7 billion per year and approximately £3 billion per year respectively. But if you looked at how much these policies would raise over several years, as the Conservatives’ analysis has done when looking at the cost of the aforementioned infrastructure projects, then the amount would obviously be much higher.
It’s unclear if Labour still plans to implement all these policies
The Conservative analysis considers a long list of Labour policy announcements, some of which date back to 2021, and appears to suggest all would be implemented by a Labour government. Labour does not appear to have specifically said it no longer intends to implement these pledges, so this may be a correct assumption—but there remains some uncertainty.
For example, the Conservative analysis lists free Covid-19 testing as one Labour spending commitment, citing Labour leader Sir Keir Starmer’s criticism of the decision in February 2022 to end free Covid-19 testing. However it’s unclear whether Labour still plans to do this. We’ve not been able to find any mention of Labour pledging this since February 2022.
Likewise, it is true that Labour said in September 2022 it would not oppose the government’s decision to reduce the basic rate of income tax to 19p. But the chancellor Jeremy Hunt ultimately chose not to proceed with the planned reduction, and we can’t find any evidence Labour has specifically said since that it would cut the rate if it was elected.
Neither Labour nor its relevant spokespeople responded when we asked if the party is still committed to reintroducing free Covid-19 testing and lowering the basic rate of income tax if elected.
Some individual policy costings appear to be out of date
Some of the individual costs attributed to specific policies are based on figures produced several months ago, and don’t appear to be reliable estimates of what these policies would actually cost under current circumstances.
For example, the Conservatives’ estimate includes Labour’s proposal for a six-month energy price cap to March 2023 (which we looked at in detail at the time). This was proposed prior to the government introducing its own, more expansive, Energy Price Guarantee (EPG).
Given we are already most of the way through the six-month period Labour’s policy would have applied to, and the £29 billion cost wouldn’t appear to be any higher than what is already budgeted for by the government, it’s unclear why this figure has been presented as an additional cost that would be incurred if Labour came to government.
Labour is currently calling for the EPG, which limits the average energy bill of a household with typical energy use in Great Britain to around £2,500 a year, to remain in place at its current level past the end of March, rather than increasing as under the government’s plans.
We’ve asked Labour to confirm how much it estimates this policy would cost, and will update this piece if it responds. However, given energy prices are currently significantly lower than last summer (and are in fact projected to fall below the level of the EPG later this year), it’s not clear that maintaining the current EPG for a further period would cost the same as Labour’s estimated cost for its original six-month energy price freeze.
The Conservative analysis puts the cost of reintroducing free Covid-19 testing at £16 billion, which is the amount spent on the entire NHS Test and Trace programme in the 2021/22 financial year.
As outlined above, Labour hasn’t confirmed it still plans to reintroduce free testing. But even if it did, it might not cost as much as NHS Test and Trace did in 2021/22. During much of this period some Covid-19 testing requirements were still in place and it’s not clear that the level of uptake would be the same if free testing was reintroduced in the future.
Other elements of the Conservatives’ calculations may overestimate the extent to which Labour’s spending commitments are fully funded.
For example, the Conservatives suggest Labour could raise £50 billion from a windfall tax on oil and gas companies, citing a radio interview shadow chancellor Rachel Reeves gave on 13 November 2022. (This interview doesn’t appear to be online, but the Conservative Party has provided us with a transcript of the quote.)
However, a few days later the government expanded the windfall tax on energy companies. Since then the figures given by Labour for how much its proposed further changes to the windfall tax could raise are significantly less than £50 billion—we’ve seen reports at different times quoting £17 billion or £13 billion across two years, though the party did not respond when we asked for its latest estimate. The Conservatives told us they used the £50 billion so as not to exaggerate the extent to which Labour’s spending commitments are “unfunded”.
The analysis also assumes Labour will raise £2 billion a year by reinstating the 45p additional tax rate, which Labour pledged to do following former chancellor Kwasi Kwarteng’s decision to abolish it as part of his mini-budget. However, given the abolition of the tax rate didn’t go ahead, and so the tax rate can’t now be reinstated, there’s no reason to include this as a way for Labour to fund its other spending commitments.
What do the Conservatives and Labour say?
A spokesperson for the Conservative Party told Full Fact: “The Shadow Chancellor has previously, and publicly, stated that all of Labour’s manifesto policies will be ‘fully funded’.”
He added that the party believed Labour had made a series of “new unfunded and uncosted commitments with little explanation of where the huge sums of money required for these will come from” and that the “significant burden of these policies, and Labour’s fiscal black hole, will end up being shouldered by families”.
We asked the Labour press office several times to confirm the party’s position on some of the policies listed, and also asked about some of its policy costings and its response to the Conservative party estimate, but did not receive a response.
Image courtesy of Nicolette