BERL have examined, reviewed, and checked a range of calculations provided by the Labour Party concerning their policy plans.
These costings have now been benchmarked against the August 2017 Pre-election Economic and Fiscal Update (PREFU) and associated Fiscal Strategy Model (FSM) 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.
Earlier analyses comparing the Labour Party plans to the May Budget Economic and Fiscal Update (BEFU) have been updated. We note that the differences between the BEFU and PREFU accounts were not large. In particular, operating spending allowances in the PREFU over the 4 years 2017/18 to 2020/21 totalled $470m more than in the BEFU; while the capital spending allowances totalled $398m less than in the BEFU.
Incorporating the policy plans listed in this document – including additional and refined plans provided by the Labour Party since the PREFU release – and assuming the economic parameters incorporated in the August 2017 PREFU (and its associated FSM), results in the outcomes for these fiscal indicators as illustrated below. Summary and detailed tables are provided in the body of this report.
Incorporated into the figures for the 5 fiscal years (2017/18, 2018/19, 2019/20, 2020/21, and 2021/22) are
- allowances for new operating spending of $0.9 billion, $0.8 billion, $0.9 billion, $1.5 billion, and $3.4 billion
- allowances for new capital spending of $0.3 billion, $1.4 billion, $2.2 billion, $2.6 billion, and $3.6 billion.
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 PREFU.
We find that the Labour Party policy plans and costings are consistent with their 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% of GDP by June 2022
- Core Crown expenses remain comfortably under 30% throughout the period to 2022.