CONSERVATIVES and Labour have both “abandoned fiscal restraint” to promise voters a spending splurge should either win the December 12 election, leading economic analysts have warned.

As Sajid Javid, the Chancellor, and his Labour Shadow John McDonnell set out plans to borrow billions more to pay for a surge in infrastructure spending, the highly respected Institute for Fiscal Studies said its analysis showed:

*the Tories proposed public investment cap at three per cent of GDP would be the highest level sustained at any point in the last 40 years while

*Labour’s plans to spend an extra £55 billion per year on investment over the next five years would more than double public investment spending to an “unprecedented” level since the very different era of the 1970s.

The think-tank noted Mr McDonnell’s plan would take UK Government investment spending from around the bottom of the international league table to around the top.

“Both parties’ plans would represent a sharp change in policy and Labour’s plans are especially ambitious,” declared Ben Zaranko, the IFS’s research economist.

“The key challenge for a government seeking to deliver investment on this scale, particularly in a short timeframe, will be finding worthwhile and viable projects in which to invest.

“Shortages in the number of suitably skilled construction workers, a dearth of ‘shovel-ready’ projects, and practical issues relating to delivery will be challenges the next government will need to think carefully about how to overcome,” he added.

Meanwhile, Syed Kamall, Academic and Research Director at the Institute of Economic Affairs, said: "Today's election speeches show both parties have abandoned fiscal restraint in favour of increases in public spending to be paid for through extra borrowing.

“The Labour Shadow Chancellor has pledged to more than double government borrowing from £25bn a year to a staggering £55bn, proposing massive increases in spending and state intervention in the economy.”

He noted that while Mr McDonnell had promised an overhaul of infrastructure, “grand government projects,” like the massively over-budget HS2 project, were notoriously inefficient.

Mr Kamall also picked up on the point about strategy.

He explained: “Promising billions of additional spending on the NHS without also thinking about the best structures and systems to deliver better patient care and choice will do nothing to fix the long-term problems facing the health service. If spending doesn’t go hand-in-hand with reforms, the NHS will continue to lag behind other EU countries in terms of healthcare outcomes.”

Noting how Mr Javid had also chosen to revise his fiscal rules in favour of hikes to public spending funded through more borrowing, the IEA director added: “While it is positive that the Chancellor stressed the importance of keeping debt in check, turning on the spending taps risks undermining the work of recent years to get the budget deficit under control, after years of over-spending.”

Ed Davey for the Liberal Democrats warned the Tories and Labour were “writing promises on cheques that will bounce” following the speeches by Mr Javid and Mr McDonnell.
 
“Any form of Brexit, whether red or blue, will make Britain’s economy weaker and people poorer. It means much less tax revenue for the Treasury.
 
“Neither Labour or the Tories can square their spending promises today with the cost of Brexit. They are writing promises on cheques that will bounce," declared the party's Treasury spokesman.
 
“In contrast, every vote for the Liberal Democrats is a vote to stop Brexit, build a brighter future and invest the £50bn Remain bonus in our vital public services and tackle inequality,” he added.