Calculating the Cost: A Deep Dive into Reform UK’s Ambitious Financial Proposals

Are the numbers in Reform UK's 'manifesto' accurate?

Nigel Farage presented his party's so-called election "contract" today, acknowledging that Reform is not expected to win. However, he introduced his party's proposals with a flurry of statistics about their potential governance. Ed Conway evaluates the accuracy of these financial figures.

Economics and data editor for Sky News, Ed Conway (@EdConway

Monday, June 17, 2024, 8:

The Reform agenda, often referred to as a "contract," presents an unusual proposal.

Many manifestos are crafted to offer voters a glimpse of the potential future under the leadership of the party presenting the document.

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Reform has clearly stated that their primary goal is not to win the upcoming election. Instead, they aim to establish a foundation by electing a few MPs who can start forming a significant opposition to the Labour Party, which they believe will likely secure victory on July 4.

Nonetheless, they have presented a detailed platform — which I'll continue to refer to as such — replete with an array of statistics that outline their intended actions should they ascend to power. Moreover, they emphasize the importance of this platform being a credible document, asserting that their proposals are "fully funded."

So, do they really? Is their math correct?

Indeed, from one perspective, absolutely. Yet from another, not at all.

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Before we discuss the latter point, let's first address the substantial figures that, according to Reform, suggest their proposal is financially viable.

Leading with the significant figures, Reform claims their financial strategies, combining tax increases and deeper spending reductions, total £150 billion.

The sum involved is substantial, yet it matches the scale of what they intend to distribute, primarily through tax reductions: £141 billion.

At first glance, it appears that their strategy involves generating more revenue than their expenses. Their budget not only covers all planned costs but also includes an additional margin for security. Quite remarkable, assuming the figures hold true!

What do those figures signify?

Many political groups typically present their financial estimates for just one year, often the last year of the upcoming legislative term. However, the Reform party has chosen to average their figures over time, complicating the assessment of their feasibility. Yet, this issue is relatively minor compared to other concerns.

The fundamental problem is that their policies begin to show flaws with even the slightest scrutiny.

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We'll begin by examining the most significant fiscal initiative. The group believes it can secure £50 billion through "cutting unnecessary government expenditure." On the surface, this appears to be a wise move. Moreover, preliminary calculations seem to support this claim.

Ultimately, the government's net current expenditure—meaning total spending minus investment and excluding debt interest—amounts to approximately £1,000 billion (one trillion pounds). Accordingly, five percent of this total equates to £50 billion.

However, at this point we start to encounter some significant challenges. This is because the £1 trillion isn't merely a matter of government agencies spending funds indiscriminately.

In reality, £140 billion of this sum is allocated to the state pension. Reform has no intention of reducing this amount, so it would be sensible to deduct it from the overall potential savings from these proposed cuts.

Approximately £180 billion of this is allocated to additional welfare expenditures. Reform indeed intends to reduce welfare costs, achieving savings of £15 billion, importantly, this is in addition to the £50 billion they aim to recover by eliminating government inefficiencies.

A gap in their calculations

It could be argued that the same holds true for foreign assistance, which amounts to approximately £12 billion in expenditures. However, Reform has already proposed cutting this by 50%, thereby generating an additional £6 billion.

Reform plans to boost funding in certain government sectors, most prominently in defense, rather than implementing cuts.

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After accounting for the sectors where Reform has indicated they will safeguard funding or have already allocated their savings to other manifesto commitments, the remaining amount of government expenditure to be cut is not £1,000bn, but rather £610bn.

Suppose Reform can indeed achieve a £5 savings for every £100 of the remaining portion of UK government expenditure. This would not result in £50 billion in savings, but rather £30 billion.

It may be becoming clear at this point that there is an issue. Suddenly, the financial cushion is gone, leaving a gap in Reform’s calculations. The revenue is insufficient to cover the cost of the proposed tax reductions.

They are venturing into the realm of Liz Truss, though with tax reductions even more substantial than those suggested by the former prime minister.

Addresses problems that major parties avoid

It's quite unfortunate, as a number of people, particularly those aligned with traditional institutions, may dismiss the Reform party’s manifesto. However, it tackles several problems that the larger political parties tend to avoid in their platforms.

For example, Reform proposes generating £35 billion by reducing the interest payments that the Bank of England makes to private banks, a result of its quantitative easing measures. Although this idea may initially seem quite radical, it mirrors actions already taken by numerous other central banks globally.

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The estimated revenue in the Reform document might be too optimistic. If the UK were to adopt the same measures as the European Central Bank, the actual amount raised could be significantly lower, potentially around £5 billion to £10 billion.

Despite this, it's quite peculiar that both Labour and the Conservatives have not tackled this issue. One would expect Labour to implement a similar policy, although likely in a less radical form, should they come into power.

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Yet, what seems distinctly far-fetched about this manifesto is the enormity of the figures that Reform is discussing.

Their proposals significantly exceed those suggested by Ms. Truss, and surpass even the largest plans put forward by the major parties in this election. The only other group proposing more generous measures is the Green Party.

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