The Conservatives love trying to reduce their estimates for the cost of a Labour government down to a neat per-household figure, which makes it easy for voters to appreciate but comes with the danger that the figure will fall apart on closer examination. That is what happened with Rishi’s Sunak’s claim, made in his ITV two-way debate with Keir Starmer, that Labour is planning tax rises of £2,000 per household. That turned out to be over four years rather than one, as many people might have assumed, and turned out to rely on all kind of assumptions which were made by Conservative party researchers rather than the Treasury officials to whom the Prime Minister tried to attribute the whole exercise.
If the Tories want to talk about black holes in public finances, shouldn’t they admit to the far larger hole in their own plans?
So what about the Conservatives’ latest claim that Labour’s promise to deny new licenses for oil and gas exploration in the North Sea will leave a £4.5 billion black hole in Labour’s spending plans, working out at £160 per household? This, like the £2,000 figure, turns out to be spread over the whole of the next Parliament rather than just one year. But is it realistic?
Given that, according to an OBR (Office for Budget Responsibility) estimate, oil and gas companies active in the North Sea this year will pay a total of £3.8 billion in taxes – corporation tax, carbon levies, windfall taxes and so on – it is not implausible that denying new licences could result in £900 million a year is less revenue (i.e. £4.5 billion over five years). But it is impossible to make any accurate estimate of this because of the volatility of oil prices. If they slump, there may be no oil company profits to tax – just as there weren’t in 2020. Were oil prices to fall like they did then, and stay low, just as they did for several years after the slump of 2014, Labour’s ban on new oil and gas in the North Sea would be academic – no-one would want to invest there anyway.
But if the Conservatives want to start talking about black holes in public finances, shouldn’t they admit to the far larger hole in their own tax and spending plans? Under current government plans, all new cars sold in Britain will have to be pure electric by 2035. This will mean that eventually the government will lose all revenue that it earns from fuel duty: which totalled £24.7 billion in 2023/24 – 2.2 per cent of all government income and equivalent to £850 per household per year. That is an enormous black hole, and how do the Conservatives plan to fill it? Answer comes there none.
It is true, of course, that the same black hole will open up under Labour’s green policy – indeed, it will open up a little sooner, as Labour wants to bring the 2035 ban on petrol and diesel cars forward to 2030. But then Labour hasn’t done what the Conservatives have done in their manifesto, which is to rule out the obvious alternative to fuel duty: road pricing, where motorists are charged directly to use the roads, on a per-mile or some other basis.
The Conservatives could go a lot harder on the cost of Labour’s green policy. The party’s plans to decarbonise the grid entirely by 2030 are considered by many, not least the GMB union, to be impractical at any price. Preposterously, Labour is claiming that it can be done at a cost to taxpayers of £1.7 billion a year (to Great British Energy) plus £3.5 billion a year in borrowing. Contrast that with National Grid ESO’s estimate of what it will cost to decarbonise Britain’s energy system by 2050 – which it has put at between £2.8 and £3.0 trillion. If Labour is relying on private capital to do most of the heavy lifting it might be disappointed – the present government last year received no bids whatsoever for its latest round of offshore wind farm auctions. It has since raised the long-term, guaranteed, index-linked ‘strike prices’ by 70 per cent.
Labour’s claim that consumers will save £300 a year thanks to cheaper renewable electricity is already out of date: it was based on an estimate by green energy lobbying group Ember, using last year’s prices of gas and renewables. Since then the price of gas has come down and the price of building wind farms has risen sharply.
The Conservatives’ problem is that while Labour’s green policies lay themselves open to attack the Tories’ policies are only a little less over-ambitious. Raise the spectre of Labour’s hugely expensive plans and they can’t help but draw attention to their own.
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