Mortgage costs 'would jump £800 under Labour'

Updated
General Election 2015 campaign - April 7th
General Election 2015 campaign - April 7th



A Labour-led government could wipe £10 billion off the British economy and add £800 a year to average mortgages as the markets take fright, the Liberal Democrats claimed today.

The party compiled a dossier of analysis by financial institutions, think tanks and City experts which also indicated that Labour would add £4 billion in interest on government debt.

Treasury Chief Secretary Danny Alexander said an unstable Labour government backed by the SNP, or a Tory administration supported by Ukip, would spell "economic disaster".

The document compiled by the Lib Dems follows a warning from party leader Nick Clegg that the economy is not "out of the woods" and people's jobs and homes could be put at risk if David Cameron or Ed Miliband attempt to govern without a majority.

The dossier highlights a report by Morgan Stanley which suggested that if an "insurgent party" - likely to be the SNP according to opinion polls - holds the balance of power, GDP growth would slow from the investment bank's estimate of 2.7% this year to 2.1%, the equivalent to £10.7 billion.

Analysis by the National Institute for Economic and Social Research (NIESR) forecast in February that under Labour's implied plans, the Bank of England's base rate would rise by 0.7 percentage points by 2019, a figure that would add £822 a year to payments on the average outstanding mortgage debts.

The NIESR analysis also predicted the same rate rise under Lib Dem plans, but the party said the respected think tank had used incorrect assumptions about its spending plans in its forecast published before the release of the election manifestos.

A senior Lib Dem source said: "NIESR used a number of assumptions about our spending plans which were wrong. We would spend less than that, which has been recognised by the Institute for Fiscal Studies, whereas the IFS confirmed that Labour's plans would involve more spending and borrowing, and the SNP would encourage that."

The party claims that the Tories' plans, with the promise of a referendum on membership of the European Union by the end of 2017, would reduce economic growth, threaten trade and the UK credit rating.

Mr Alexander, who will step up his attack in a speech in Aberdeen, said: "It is clear that neither Labour nor the Conservatives will achieve a majority. So the key question is who holds the balance of power, and what sort of government emerges afterwards.

"An unstable government, unable to take serious decisions, pulled sharply to left or right, with Alex Salmond or Nigel Farage, would cost us all dear. It would jam the brakes on the economic recovery.

"As the market commentary makes clear, such an outcome would lead to higher costs of government borrowing, mortgage costs rising by at least an estimated £800 a year, and a weaker pound.

"That would be an economic disaster for Britain, and an insult to the massive effort and the many sacrifices made by millions of people and businesses who are powering our recovery.

"The Liberal Democrats have shown we can deliver strong and stable government. We are the only party that can keep Britain in the centre ground, the markets happy and the recovery going."

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