The Liberal Democrats say they plan to spend almost £27 billion more a year by 2029 if they win the next election – on policies including health, defence and education.
The party says it will fund this through taxing banks and billionaires instead of raising taxes for the general public.
FactCheck takes a look.
How would the Lib Dems raise £27bn more a year?
The Lib Dems say they’ll tax banks and tech giants, and won’t increase National Insurance, income tax or VAT.
However, the Institute for Fiscal Studies (IFS) said that by focusing on taxing banks, energy companies and tech giants, “many of these tax rises are intended to look ‘victimless’ – but of course they are not”.
“We are already raising more from taxing companies than at any time in decades,” the IFS noted, adding that “there are clear risks that [the Lib Dems’] package of tax measures would not raise the £27bn a year that they claim”.
An extra £7bn from tax avoidance and evasion?
It’s also worth noting that £7.2bn of this £27bn is revenue the Lib Dems hope to raise from “giving HMRC (HM Revenue & Customs) the resources it needs to properly tackle tax avoidance and evasion”.
The party said it would narrow the £36bn tax gap – the difference between the amount of money HMRC is owed and the amount it actually receives – by investing an additional £1bn a year into the department.
It expects this will yield £7.2bn in return. This is based on the assumption that every £1 spent will raise £9 in tax revenue that would otherwise be lost to the exchequer. This assumption comes from comments made by Jim Harra of HMRC in November 2022.
But as FactCheck has previously reported, there are questions over whether any government could get this kind of return on its investment in HMRC.
We put this figure to the IFS in April, when Labour made a similar claim on the basis of Jim Harra’s comments – promising to spend £555m for a £5bn reward.
Deputy director Helen Miller told FactCheck at the time that although “additional investment in HMRC would likely raise revenues”, “there is uncertainty around exactly how much could be raised for each additional £1 of investment in HMRC”.
She said a Labour government “may find that their proposed £555 million of investment into HMRC does not yield the additional £5 billion they are targeting by the end of the next parliament”.
This means plans from the Lib Dems to raise just over £7bn from clamping down on tax avoidance by investing an additional £1bn a year into HMRC could also be in doubt.
A spokesperson for the Liberal Democrats told FactCheck: “Under our plans, we would ensure that day-to-day spending does not exceed the amount raised in taxes.
“We have therefore set out clearly how we plan to raise the additional revenue to pay for our increases in current spending, such as reversing the Conservatives’ tax cuts for the big banks and imposing a proper windfall tax on the super-profits of oil and gas companies.”
They added that “there is uncertainty around any economic and fiscal forecasts”, but the party has “taken a cautious approach to estimating the revenues from our tax policies” and is “confident that they would raise the amounts set out in our costings”.
(Image credit: Dinendra Haria/LNP/Shutterstock)
