LONDON // The economy has become the elephant in the room as Britons prepare to vote for a new government tomorrow. Although the three main parties have spelt out some of the spending cuts and tax rises that they will have to introduce after the general election to cut the huge national deficit, economists say all of them are being, at best, disingenuous about the true size of the pain that will have to be inflicted on services and jobs.
The reason is simple: while everyone knows that there is a gaping hole in the UK economy, few party leaders want to explain exactly how they plan fill it with public sector job losses, tax rises and cuts in public services on the eve of polling. In a hard-hitting report, the Institute for Fiscal Studies (IFS), one of the country's foremost economic research organisations, has accused all three parties of failing to explain adequately how they would fill the "black hole" that led to the country borrowing a record £163.4 billion (Dh911bn) in the 2009-10 financial year.
According to the IFS, the parties have made "misleading" claims about the billions that each estimates it could garner in efficiency savings in the public sector. Its report also accused the Labour, Conservative and Liberal Democrat parties of denying voters the opportunity of making "an informed choice" tomorrow by failing to spell out in detail how they would tackle the budget deficit. According to the institute's analysis of the parties' manifestos, the ruling Labour Party had identified only about one-eighth of the cuts that would be necessary, the Conservatives less than one-fifth and the Liberal Democrats about one-quarter.
"Given that this fiscal repair job is likely to be the major domestic policy challenge for the next government, it is striking how reticent all three main UK parties have been in explaining how they would confront the task," said Robert Chote, director of the IFS. "For the voters to be able to make an informed choice in this election, the parties need to explain clearly how they would go about achieving it. Unfortunately, they have not."
The accusation has been supported by a second report from another economic think tank, the National Institute for Economic and Social Research, which estimates that, whatever party wins power tomorrow, it will have to increase the basic rate of income tax by 30 per cent by 2015 to reduce the budget deficit to a manageable size. And that, says the report, would be on top of an extra £30bn in spending cuts and other tax rises. "It will be a shock and very painful for almost everyone," said Simon Kirby, one of the report's authors.
Despite the criticism, all three parties continue to insist that it is being honest about the cuts it will introduce. When asked about the gaps highlighted by the IFS report and in an analysis by the Financial Times, Lord Peter Mandelson, the business secretary and Labour's chief campaign strategist, replied testily: "When I last looked, neither the Financial Times nor the IFS is standing in this election.
"What we have done is to set out in our manifesto what we believe are the priorities for our country and for families. Everyone can see those choices." David Cameron claimed that his Conservative Party has "gone further than any opposition I can remember in my political lifetime" in spelling out the cuts that would be needed. The Liberal Democrat leader, Nick Clegg, said the IFS report "concluded that the Liberal Democrats's plan is the most credible".
He added: "Even if there's still much more work to do, we have gone further in spelling out how to cut the deficit." Meanwhile, Mervyn King, the governor of the Bank of England, appears to believe that the party that wins tomorrow will be picking up not only the reins of government but also a poisoned chalice. According to David Hale, a US economist who has known Mr King for many years, the Bank of England chief believes that the election winners will become so unpopular by having to impose massive cuts and tax rises that they will ruin any future chances of electoral success for a generation.
Mr Hale said in an interview with an Australian television network: "I saw the governor of the Bank of England last week when I was in London, and he told me whoever wins this election will be out of power for a whole generation because of how tough the fiscal austerity will have to be." The elephant in tomorrow's election, it seems, might turn out to be more of a large and vengeful woolly mammoth.