Tax and Fiscal Policy

Unambitious Liberal Democrat manifesto hamstrung by tax and spending commitments


Press Release

Reaction to official Labour Party manifesto launch

Press Release

Reaction to the Liberal Democrat Party's manifesto

Commenting on the Liberal Democrat Party’s manifesto, Mark Littlewood, Director General at the Institute of Economic Affairs, said:

“The Liberal Democrats’ manifesto is full of spending and tax commitments which could well have a perverse effect on the UK economy.

“On the plus side, the sums involved are more realistic than we have seen from other parties so far. The Liberal Democrats would increase current (day-to-day) spending by £30bn, nearly £20bn less than the Labour Party. What’s more, rather than pay for all of this straightaway, the cost would be divided between £16bn of tax rises and £14bn in borrowing. This does at least reduce the immediate hit on the economy from higher taxes and might even provide a small fiscal boost, but only by delaying the pain.

“What’s more, the proposed increases in income and corporation tax are vulnerable to the same criticisms as those made of Labour’s plans. The much smaller increase in corporation tax (to 20% rather than Labour’s 26%) does make it more likely that the expected revenues will be achieved. But far more people will be affected by the 1p increase in income tax.

“Similarly, the planned increase of £100bn in infrastructure spending is much less ambitious than Labour’s £250bn. But there are the same doubts about any government’s ability to invest wisely while burdening future generations with more debt.

“The manifesto also features some poorly targeted policies; the extension of free school meals to all primary school children is an expensive and unnecessary pledge which would needlessly subsidise middle class parents. The Liberal Democrats also misunderstand the key problems facing the NHS. Throwing ever more money at our ailing healthcare system has done little to improve outcomes. It’s time for a fundamental reassessment of how healthcare is provided in the UK, not a tinkering at the edges.”

Notes to editors:
For media enquiries please contact Stephanie Lis, Director of Communications: [email protected] or 020 7799 8909 or 07766 221 268.

Relevent IEA publications

Income tax increases
In 2016 the Institute of Economic Affairs published ‘Taxation, Government Spending and Economic Growth’, which called to abolish twenty taxes to improve and encourage economic growth. To download this please click here.

Corporation tax increases
In 2016 the Institute of Economic Affairs published ‘Why corporation tax should be scrapped’, which calls to bring capital taxation into the 21st century. To download this please click here.

In 2016 the Institute of Economic Affairs published ‘Universal healthcare without the NHS” which recommended emulating best elements of various European healthcare systems, whilst retaining universal healthcare access, to save lives. To download this please click here.

Price Controls
In 2015 the Institute of Economic Affairs published ‘Flaws and Ceilings: Price controls and the damage they cause’, which explains why price controls are so damaging to our economy. To download this please click here.

The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems and seeks to provide analysis in order to improve the public understanding of economics. The IEA is a registered educational charity and independent of all political parties.