Headlines: May 18th, 2001

As with the Conservative Party’s manifesto, the Institute for Fiscal Studies has been looking into the likely outcomes, based on manifesto promises, if either Labour or the Liberal Democrats win power. (see Publicnet Briefing, May 16)As might be expected, it says that the Liberal Democrats’ plans would some families worse off as a result of a range of tax increases – such as a rise of 1p in the basic rate of income tax, a new 50% rate on incomes over £100,000 and increased capital gains tax.

However despite the planned increases, 60% of households – those with lower incomes – would actually gain. The losers are the households in the top 40% income bracket.

The IFS points out that the proposed tax increase would still leave UK tax as a share of GDP below the level of most European economies.

The IFS has also examined Labour Party proposals on welfare reform. Details and costs have not been announced for the three new welfare ‘credits’ proposed for one for parent families, pensioners on modest incomes and for childless low-earners.

Calculated assumptions have been used to assess that these new benefits would cost 2.5billion pounds to introduce. As with the Lib Dem plans, it is the bottom 60% of income households who would benefit.

The IFS is guarded about Labour’s plans for investing lump sums on behalf of babies, and proposals to reward low income families who save.

It says the merit of these policies depends on the exact aim, which remains unclear.

Liberal Democrat link: www.ifs.org.uk/election/ebn8.pdf

Labour link : www.ifs.org.uk/election/ebn9.pdf