Voters were wooed by both parties on Thursday with promises of billions more spending as the chancellor and his Labour counterpart set out their party’s economic plans.
John McDonnell, speaking in Liverpool, said Labour would spend £150 billion on schools, hospitals and homes – with an “irreversible shift” of power and wealth from London to the working people of Britain.
Chancellor Sajid Javid, speaking in Manchester, said the Conservatives would also increase borrowing to pay for new infrastructure.
Both said low interest rates would help fund the increase in public spending.
Labour has a plan for an economy that works for the many, not the privileged few. This is what it looks like: pic.twitter.com/km5RSq7B0D
— The Labour Party (@UKLabour) November 7, 2019
Mr McDonnell, accompanied by Labour leader Jeremy Corbyn, setting out Labour’s plans said: “Power is coming home, back to the people.
“That means change, real change, and it means investment on a scale never seen before in this country and certainly never seen before in the north and outside of London and the south east.
“To achieve that objective it also requires, therefore, an irreversible shift in the centre of gravity in political decision making as well as investment in this country from its location solely in London to be relocated to the North and regions and nations of our country.”
Mr Javid described Labour’s plans as “fantasy economics”, but said the Tories would also borrow “some more” to invest in hospitals and railways.
Today I announced the fiscal anchor that will keep borrowing & debt under control. Labour cast it off too many times in the past. Now McDonnell admits they won’t even have one – guaranteeing under Labour spending, borrowing & debt will spiral out of control. Just like last time. pic.twitter.com/baYq6fTpW0
— Sajid Javid (@sajidjavid) November 7, 2019
He announced three new fiscal rules to “control borrowing, to control debt, and to control debt interest” – describing them as “new rules for a new economic era”.
And he promised a “step change” in investment in public infrastructure, but to manage the interest payments on the debt “responsibly.”
The Institute of Fiscal Studies (IFS) said both parties were proposing substantial increases in government spending, with the Tories’ plans representing the highest level sustained at any point in the last 40 years.
The IFS said Labour plans to spend an extra £55 billion per year on investment over the next five years, would more than double public investment spending – taking UK government investment spending from around the bottom of the international league table to around the top.
Ben Zaranko, research economist at IFS, said: “Both parties’ plans would represent a sharp change in policy, and Labour’s plans are especially ambitious.”
Rain Newton-Smith, chief economist at the Confederation of British Industry (CBI), said: “Any new spending must be planned responsibly to be sustainable, and more details will be needed on how both Labour’s and the Conservatives’ plans will be funded.
“But success will be built on more than money – businesses’ main message is simple: so much more can be achieved by working with business, not against it.”
General Government gross debt was £1,821.3 billion at the end of the financial year ending March 2019, according to the latest figures from the Office For National Statistics.