Labour and the Conservatives have triggered a public spending bidding war, promising massive programmes of borrowing that will return public investment to levels last seen in the 1970s, according to Britain’s leading experts on the public finances.
The Institute for Fiscal Studies said plans unveiled by Sajid Javid, the chancellor, and John McDonnell, his Labour shadow, would represent a decisive break with the past, but warned that a future government might have trouble delivering projects on the scale envisaged.
On a day dominated by the ditching of austerity by both main parties, Javid’s plan to spend an extra £20bn a year on capital projects such as roads, railways, schools and hospitals was trumped by McDonnell’s proposal to increase infrastructure investment by £55bn for the next five years.
The IFS said the shadow chancellor’s plans were the most ambitious. His party would more than double net capital spending to £100bn a year, catapulting the UK from near the bottom of the international public infrastructure league table to near the top. Under Labour, capital spending would be close to 5% of GDP – a level last seen at the time of the IMF-imposed cuts in 1976. Read more