U.K. State to Return to 1970s Size Under Election Spending Plans

(Bloomberg) --

U.K. government spending is heading for a return to levels not seen for four decades regardless of who triumphs in the upcoming election, according to the Resolution Foundation think tank.

If Prime Minister Boris Johnson's Conservative Party wins, existing pledges to bolster outlays would lift government spending to 41.3% of the economy by 2023-24 well above the average 37.4% of the past two decades. Resolution added that any further increases, such as more spending on the National Health Service, would easily take the average above the 42% seen from 1966 to 1984.

The political gridlock created by Brexit is forcing Britain's third election in five years on Dec. 12. While leaving the European Union is the main issue at hand, both the major parties are trying to woo voters with promises of more money for public services.

The opposition Labour Party's fiscal plans would push the size of the state to 43.3% of the economy, according to the report on Monday. While Labour has also pledged tax increases, the Conservatives have emphasized tax cuts, making it harder to pay for their spending.

“After an unprecedented decade of austerity, both main parties are gearing up to turn the spending taps back on,” said Matt Whittaker, deputy head of Resolution. “The fact is that whatever promises are made over the course of this election campaign, taxes are going to have to rise over the coming decade.”

The think tank assumes that the Tories deliver on the 13.4 billion-pound ($17 billion) spending boost pledged for 2020-21 and then increase expenditure in line with GDP, while adding 20 billion pounds to the capital budget. For Labour, it adds 49 billion pounds of day-to-day spending to the Post-Spending Round baseline and 25 billion pounds of capital spending, figures promised in the party's 2017 election manifesto.

--With assistance from Andrew Atkinson.

To contact the reporter on this story: Brian Swint in London at bswint@bloomberg.net

To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, David Goodman, Fergal O'Brien

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