Research Briefing | Jun 19, 2024

UK: Why Labour and Tory manifestos are a missed opportunity

The pledges announced in the Conservative and Labour parties’ manifestos will have little economic impact according to our modelling, especially considering the impending fiscal consolidation that both studiously ignore.

What you will learn:

  • Consolidation is needed – the UK’s public finances are in a very weak position. We expect UK nominal GDP growth to be lower than the effective interest rate the government will pay on debt over the next five years. Of the advanced economies, only Italy has similarly poor debt dynamics. However, the refusal by both Labour and the Conservatives to rethink the UK’s flawed fiscal rules will hinder growth prospects and force more policy tightening than is absolutely necessary.
  • The manifestos of both parties imply the plans to tighten fiscal policy by 3% of GDP inherited from the current government will be implemented. New tax and spending pledges are small in scale and fiscally neutral. Indeed, scenarios run on our Global Economic Model find their manifesto pledges will have a negligible impact on GDP growth and asset prices.
  • We doubt either party would stick to its manifesto plans, particularly Labour if it wins a large majority. A more likely scenario is that Labour would tweak the debt rule to remove the distortionary effects of losses on the Bank of England’s Asset Purchase Facility. This would allow higher spending and could result in slightly stronger GDP growth.
Back to Resource Hub

Related Content

UK Elections | Beyond the Headlines

In this week’s Beyond the Headlines, join Andrew Goodwin, Chief UK Economist, as he outlines how we’ve changed our UK interest rate forecast after a busy week for the UK economy.

Find Out More
Government bonds will not return as diversifiers soon

Global construction activity has continued to stagnate over 2024 as the impact of high construction costs, policy tightening by central banks, and the real estate downturn in China offset the activity gains from infrastructure stimulus.

Find Out More
Prospects for policymaking in a divided government

We subjectively assign a greater probability of a divided government after the 2024 elections rather than one that is fully controlled by Republicans or Democrats. After considering the prospects for policymaking under a Republican trifecta, we modeled the macroeconomic impact of a divided government with either of the two leading presidential candidates at the helm.

Find Out More
Global Scenarios Service: Inflation Victory?

The outlook for the global economy has improved since the previous quarter’s Global Scenarios Service report and a soft landing is in prospect. While we anticipate a period of only steady and unspectacular growth ahead, this is no mean feat after the aggressive policy rate hikes of 2022 and 2023.

Find Out More