The cost of costing manifestos

Making sure to add up the cost of all your manifesto promises seems like common sense. As I show in this article, though, it is anything but…

The costing of the manifestos is perhaps the most unrelenting of all the election traditions. Like the interminable bore who insists on only paying for his exact share of the restaurant bill, the media police party manifestos of all colours: crying foul for each and every ‘uncosted’ policy and giving praise where spending has been matched with tax – a sort of Tinder for fiscal rectitude.

Costing is a new phenomenon, based on poor economics and politically biased…

But governments are not really like households at all: they are different in type rather than size. Unlike the average household, governments can create money, by borrowing from the bond market. It is this which funds the NHS, public schools and the Royal Navy, not tax income. Sure, governments cannot borrow indefinitely – as the Greek crisis has shown – but in normal times they are able to do so with relative ease. In 1945, for example, British national debt stood at around 200% GDP (it is now ‘only’ 81%), but the Attlee government was still able to fund the construction of the welfare state.

In reality, each penny of new spending does not need an extra penny of tax. To insist that it does is to fundamentally misunderstand economics.

Finish the article on Huff Post

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