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Examining Labour claims about future cost of Tory borrowing plans

July 26, 2024
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Senior Labour figures have repeatedly claimed homeowners will pay “£4,800 more on their mortgage” under Conservative plans, should they win the election.

But this claim risks misleading people and is based on questionable assumptions.

What is the £4,800 based on?

The claim – set out in a 16-page Labour dossier – is based on what the party says is “a wish list of unfunded promises” in the Conservative manifesto.

Labour says the Tory shortfall will lead to an increase in government borrowing, which will feed into higher interest rates.

This would add a total of £4,800 to someone’s mortgage over the next five years, Labour claims.

In other words, it is not an annual figure. But this has not been made clear by Labour shadow ministers when making the claim during media interviews.

Why could this be misleading?

Labour assumes the Conservatives’ tax-and-spend policies will lead to a £71bn spike in borrowing over the next parliament.

When public spending is higher than tax receipts, governments may borrow to plug the gap.

Labour has calculated the Tories’ manifesto pledges would lead to a £71bn borrowing increase over the next five years which would raise interest rates by 0.56 percentage points every year on average, modelled on previous Treasury research. This is how the party has arrived at the £4,800 figure.

But the calculation relies on a number of assumptions.

For example, it assumes the Conservatives’ welfare reform plan will fail to save any money – despite the Tories pledging to find £12bn a year by the end of the parliament.

It is true that questions have been raised about whether the full £12bn of savings can be found.

This includes the independent Institute for Fiscal Studies (IFS), which described the Tory welfare pledges as “not remotely up to the challenge”. The IFS also points out some announcements are not new, meaning any potential savings have already been factored into official forecasts.

But despite the scepticism, it is by no means certain that the Conservatives will fail to find any welfare savings at all, as Labour assumes.

Other assumptions

Labour also assumes that every penny of any shortfall will be filled by extra borrowing. While this is an option, a government can also choose to increase taxes and/or cut spending to reduce or eliminate any extra borrowing requirements.

On the calculation of how much people’s mortgages could rise, the document does not set out the figure for an “average house”, nor the details of the calculations. This makes it very hard to reproduce Labour’s workings.

Furthermore, the majority of mortgage customers are on fixed-rate deals, so many people are unlikely to be immediately affected by any rise in future interest rates – at least not until their current deal runs out. It is unclear from Labour’s dossier whether this has been taken into consideration.

It is also worth saying that a large proportion of homeowners have no mortgage so would not pay extra in any scenario.

More on General Election 2024

Risks misleading

Given how many assumptions have gone into Labour’s calculations, the £4,800 figure risks misleading people.

BBC Verify has previously concluded that a Conservative dossier – which claimed Labour’s polices amounted to a £2,000 tax rise per family – also risked misleading people.

In that instance, the Conservatives were also criticised by the statistics regulator for the way their claim was presented. This included using a total figure without being clear it was spread over a number of years – something Labour has also done in this case.

In a letter on 21 June, the regulator said that many of the things it had said about the £2,000 claim also applied to the £4,800.

“When distilling these claims into a single number, there should be enough context to allow the average person to understand what it means and how significant it is,” the letter said.

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Tags: borrowingclaimscostExaminingfutureLabourplansTory

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