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Today @resfoundation published a short evaluation of whether the Conservatives and Labour will manage to meet their fiscal rules if they win the election. Link below but here is a quick tl;dr thread on our results https://www.resolutionfoundation.org/publications/playing-by-their-own-rules/
Both Labour and the Conservatives say they will not borrow to fund day-to-day spending, only for investment. But given updates to government finance forecasts since March, that leaves both parties with very little wiggle room (the blue and red lines close to 0 in the chart).
In fact, the room they'd have (0.2% of GDP) is lower than under any new set of fiscal rules since 2010. And over the past 20+ years, on average, borrowing ends up 1.5ppts higher than expected after 3 years - so both parties will struggle to keep within their limits.
Labour's rule seems particularly at risk (i.e. already broken) because these numbers don't include the roughly £12bn per year compensation they have promised for #WASPI women.
But the Conservatives look like they may have under-budgeted for some things like additional departmental spending after 2020-21 for all the promised extra doctors, nurses, police and prison spaces.
Both parties want to increase investment (a good thing!), but this comes with additional costs to public finances as more assets mean higher depreciation. This could add an additional £9bn annual cost under Labour's ambitious plans by 2024-25.
Labour also want to ensure that public assets increase faster than debt (great!). An approach we pushed for in our big fiscal rules paper - "Totally (net) worth it". https://www.resolutionfoundation.org/publications/totally-net-worth-it/
But their manifesto assumes extra investment will create assets equal to their cost - this doesn't happen when investment is through grants (e.g. money to improve home energy efficiency). A hypothetical scenario shows how large an impact capital grants could have on their rule.
More detail on all of this in today's note from the Resolution Foundation's macro team: @rjdhughes , @JamesSmithRF and @carapacitti https://www.resolutionfoundation.org/publications/playing-by-their-own-rules/
