The Greens’ tax and spending plans are a deliberate rejection of the parties who want to cut the deficit with a promise to “end austerity”.
The party’s manifesto (PDF) includes a long shopping list of costly pledges, from cutting train fares by 10% (£1.7bn a year), to providing free, universal early education and childcare (£8bn a year).
In total, the Greens would be spending a chunky £176bn a year more than George Osborne’s latest budget plans suggest by 2020.
Some of these ideas would be partly funded by re-allocating spending: cutting road schemes and cancelling HS2 would help to fund £45bn worth of public investment in insulating homes and backing renewable energy, for example.
The Greens would hope to meet most of the cost of these measures through swingeing new taxes on the rich, including a “wealth tax”. Under this system, anyone with assets – including their home, but also their pension savings, share portfolio and so on – worth more than £3m, would pay 2% a year. For someone with assets of £3.5bn, for example, that would mean an annual tax bill of £70,000.
In total, the Greens believe this would raise £25bn a year by 2020 – that’s almost the entire revenue currently raised from council tax. By comparison, raising the basic rate of income tax by 1p brings in just £4.5bn a year.
Another source of revenue would be a “Robin Hood tax” on the finance sector’s billions of pounds of financial transactions. The party claims, in line with the Robin Hood tax campaign’s calculations, this would bring in another £20bn.
In addition, a severe crackdown on tax evasion and avoidance would, it says, bring in another £30bn: four times the £7.5bn Labour hopes to raise by beefing up HMRC’s powers.
The revenue from taxes such as these is extremely hard to estimate because, like Labour’s pledge to abolish non-domicile tax status, it is difficult to predict how taxpayers may change their behaviour as a result. Wealthy individuals might try to shift their assets offshore, for example, and they might have less incentive to accumulate assets in the first place.
There is also a battery of other potentially controversial tax changes, including a sharp increase in alcohol and tobacco taxes (worth almost £6bn a year by 2020), and an “unhealthy food tax” worth another £6.7bn. Again, behavioural change – which in this case is exactly what the Greens hope to encourage – could reduce potential revenue.
In total, the Greens believe this package of drastic changes to the tax regime would boost government revenues to a level £157bn higher than the Conservatives are counting on.
Despite the anti-austerity rhetoric, on that basis the party believes it could still cut the deficit on the public finances every year from 2016 onwards. By 2019, it would be just £21bn, or a relatively modest 1% of GDP.
So if we take the Greens’ expectations for bumper tax revenues at face value, their many pledges could be paid for. But banking on £50bn a year from largely untested taxes looks courageous and in the end, their manifesto may be best viewed as a shopping list of demands to trade for future support for a Labour government.
