By Matthew Barrett
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In a Parliamentary Question released on Thursday, the official Treasury estimate of the cost of Labour's five-point economic plan was given – it totalled more than £20 billion, which would be added to the budget deficit.
Michael Meacher, the veteran left-wing Labour MP, asked:
"To ask the Chancellor of the Exchequer pursuant to the contribution by the Chancellor of the Exchequer of 12 October 2011, Official Report, columns 366-82, what evidence he considered in concluding that adoption of the five-point plan would (a) increase the deficit by £27 billion and (b) raise interest rates by one per cent."
- Reducing the rate of VAT for a year "would increase the deficit by around £12.4 billion."
- A temporary reduction in VAT on home improvements would increase the deficit by £2.2bn
- A temporary reduction in employer national insurance contributions for small businesses taking on extra workers is estimated to increase the deficit by around £1bn
- "The cost of bringing forward capital spending would depend on the specific proposal. The estimate given in the debate reflected an illustrative assumption that the policy would imply no real terms cuts in capital departmental expenditure limits in 2011-12. If this were the case, the increase in the deficit would be £5.5 billion"
This Treasury estimate is significant, because the opposition has refused to cost its own plans. Indeed, Labour is the only opposition centre-left party in a high-deficit Western country currently proposing less deficit reduction – and an increase in the budget deficit
In the same Parliamentary Question, Chloe Smith released information on what a 1% rise in interest rates would mean for Britain:
"Estimates of the effect of higher interest rates on debt interest costs are published by the OBR in the supplementary tables accompanying their Budget forecast. Table 2.18 shows that a 1% rise in gilt yields across the forecast period would raise debt interest costs by £6 billion per year by 2015-16. A 1% rise in mortgage interest rates is estimated to raise annual mortgage payments by UK households by around £10 billion. This is based on figures for the stock of outstanding mortgage debt published by the Council of Mortgage Lenders. A 1% rise in the rate of return on portfolio UK debt held by foreign residents is estimated to increase net annual interest payments to foreign creditors by around £15 billion, based on Office for National Statistics data."