BERL have reviewed and checked a range of calculations provided by the Labour Party concerning their policy plans.
These costings have been benchmarked against the May 2017 Budget Economic and Fiscal Update (BEFU) and associated Fiscal Strategy Model (FSU) to determine the overall impact on the Government’s fiscal situation.
Particular attention has been paid to whether the plans are consistent with the Budget Responsibility Rules (BRR) published by the Labour Party and the Green Party; namely
Operating Balance before Gains and Losses (OBEGAL) in surplus across an economic cycle
Net Core Crown debt reduced to 20% of GDP within 5 years
Core Crown spending is managed around a trend of 30% of GDP.
Incorporating the policy plans listed in this document, and assuming the economic parameters incorporated in the May 2017 BEFU (and its associated FSM), results in the outcomes for these fiscal indicators as illustrated in this report.
Further, it should be noted that incorporated into these figures are allowances for new operating spending totalling $0.9 billion, $1.8 billion, $3.2 billion, and $4.1 billion in the – respectively – 2018/19, 2019/20, 2020/21 and 2021/22 June fiscal years.
Finance costs have been adjusted to account for the different debt tracks. The implied interest rate on Government gross debt – as per the FSM – were assumed to apply to the different debt tracks.
In addition, as noted above, we have not changed the economic growth parameters assumed in the BEFU.
We find that the Labour Party policy plans and costings are consistent with the stated Budget Responsibility Rules and, in particular:
- The OBEGAL remains in surplus throughout the period to 2022
- Net Core Crown debt is reduced to 20% by June 2022
- Core Crown expenses remain comfortably under 30% throughout the period to 2022.