Would families face a £2,000 tax rise under Labour?

The Conservative claim that a Labour government would mean a £2,000 tax rise for every working family dominated the first TV debate of the election on 4 June, and has been very widely covered since. 

The Prime Minister Rishi Sunak claimed that Labour leader Sir Keir Starmer “would put up everyone’s taxes by £2,000” and that a Labour government would mean “£2,000 higher taxes for every working family”. Mr Sunak and other senior Conservative politicians, as well as the party itself, have made similar claims both before and during the election campaign.

However the £2,000 figure is not reliable, and is based on a number of assumptions. Many of the costings supporting it are uncertain because details of Labour’s plans are not yet clear. And it’s also a cumulative estimate—so the Conservatives are claiming every working family will pay £2,000 more in taxes over the next four years, rather than annually.

Labour has strongly rejected the Conservatives’ figure, with Mr Starmer describing it as “absolute garbage” and a Labour press release accusing Mr Sunak of having “lied 11 times” about it. 

Shadow chancellor Rachel Reeves has said Labour will not put up income tax, National Insurance or VAT (though the party has pledged to charge VAT on private school fees). 

It’s impossible for us to say whether any politician will end up honouring a specific pledge—we often say we can’t fact check the future—but we’ve looked here at how the £2,000 figure was calculated and some of the assumptions it relies on.

When politicians and political parties make broad estimates, it’s important they are clear about what calculations they’ve done and the limitations of any figures they quote. 

We’ve contacted both the Conservatives and Labour for comment and will update this article if we receive a response. 

Where does the £2,000 come from?

According to a document published by the Conservatives titled ‘Labour’s tax rises’, there is a £38.5 billion “black hole” over the next four years in Labour’s plans. The party has calculated this figure by costing 19 Labour spending commitments and eight “revenue raisers” until 2029. The Conservatives say these commitments have all been made by a current member of the Shadow Cabinet, in official Labour party documents and since Mr Starmer outlined Labour’s ‘five missions’ for the country in February 2023.

The £38.5 billion figure has been divided by 18.4 million, which is the number of UK households (not families, as claimed) including at least one person aged 16-64 and at least one person in work, according to the Office for National Statistics. This comes to £2,094, which the Conservatives have sometimes quoted precisely. 

This approach makes a couple of fundamental assumptions, quite apart from those the underlying costings are based on. 

Firstly, it assumes that Labour would choose to raise taxes to fill any “black hole” in its plans. As consumer finance expert Martin Lewis has suggested, it could be funded by borrowing instead. 

Secondly, in claiming “every working family” would pay around £2,000 more, despite this figure being calculated as an average, the Conservatives seem to assume that any Labour tax rises would be applied to all households in exactly the same way, which appears unlikely. 

Is this analysis based on Treasury costings?

In the 4 June TV debate, Mr Sunak claimed: “Independent Treasury officials have costed Labour's policies and they amount to a £2,000 tax rise for every working family.” 

But as we wrote earlier, the suggestion that the figure comes from Treasury officials is not entirely accurate. Many of the figures in the Conservative document do come from the Treasury’s costings of opposition policies published earlier this year, but not all of them, and the Treasury was not involved in calculating the total figure.

The Treasury’s most senior civil servant, James Bowler, wrote in a letter to Labour’s Darren Jones on 3 June that “civil servants were not involved in the production or presentation of the Conservative Party’s document ‘Labour’s Tax Rises’ or in the calculation of the total figure used”.

Mr Bowler added: “Any costings derived from other sources or produced by other organisations should not be presented as having been produced by the Civil Service.” 

Moreover, the impartiality and independence of these Treasury costings has also been questioned, because many rely on assumptions from special advisors, who are political appointees not civil servants.

A Conservative party spokesperson told the BBC: “We were fair to Labour in the production of the Labour tax rise briefing note and used only clear Labour policies, their own costings or official [HM Treasury] costings.”

Not all the spending figures are reliable

We’ve not been able to examine every spending commitment listed by the Conservatives, but several we have looked at appear unreliable or could use significant context.

One of the most expensive commitments included is Labour’s plans for insourcing, which is when the government brings services in-house, or by establishing a wholly or jointly owned organisation to manage them. The Conservatives estimate this would cost almost £6.5 billion over four years. 

However, this figure is based on the Treasury’s costings which make an unreliable assumption that “services are 7.5% less efficient if they are insourced”. The 7.5% comes from a 2019 report from the Institute for Government think tank on outsourcing, which says “the most robust study designs find savings in the region of 7.5%-10%”. 

This is taken from a section in the report specifically about outsourcing cleaning contracts. The deputy director of the Institute for Government, Emma Norris, said on X: “Our work does not support Sunak’s £2k tax rise claim. We said *in some cases* cost savings could be associated with outsourcing. But the evidence is limited and cannot be applied to all services.”

The Treasury said: “The 7.5% assumption has been used as directed by special advisers, but we have low confidence in this because the difference between the cost of outsourcing and in-house delivery is highly circumstance specific.”

Moreover, the £6.5 billion estimate also assumes that the annual insourcing rate would be 50% from 2025/26 onwards. But Labour has not given many specific details on how much they intend to insource and on what timescale. 

The document also includes a Treasury estimate on the cost of Labour’s pledge to introduce free breakfast clubs in every primary school in England, which it puts at £4.5 billion over four years. But there is uncertainty about what these clubs will look like. 

The estimate assumes the clubs would involve both breakfast and childcare, and that 50% of pupils would attend. 

The current National school breakfast club programme (which is provided at 2,700 schools in disadvantaged areas) has a take-up rate of 30%. The Treasury’s alternative estimate for the total cost of breakfast clubs that only involve breakfast, not childcare, and have a 30% uptake, is £587 million until 2028/29. 

Another of Labour’s pledges to deliver more mental health support teams is estimated by the Conservatives to cost almost £2.3 billion over four years. This is similarly based on a number of assumptions—for instance, that this would involve putting a youth worker in every A&E suite, and a mentor in every state-funded alternative provision school, even though Labour has said its policy is to pilot both approaches.

Labour’s pledge to reform bus services has been costed at £3.6 billion. However the Treasury analysis says “this costing has been done at pace with limited data and, therefore, the uncertainty and risk of error is high”.

Another item is Labour’s pledge to deliver two million more NHS appointments per year, which the Conservatives cost from 2025/26, despite Labour not having committed to a timeline for delivery. 

Figures on revenue are also uncertain

There is also considerable uncertainty behind the analysis of Labour’s “revenue raisers” too, though again we’ve not been able to look at them all in detail. 

The Conservatives’ estimate for how much Labour’s plan to charge VAT on private school fees would raise is £3.8 billion over the next four years. This assumes that 11% of pupils who were privately educated would move each year to state schools, and estimates for the cost to the state sector are included in those figures.  

Estimates of the impact of this policy vary, however. The Institute for Fiscal Studies estimated in 2023 that removing VAT status and business rate relief from private schools would raise an extra £1.3 to £1.5 billion per year “in the medium to long run” even when behavioural changes, such as 3% to 7% of pupils moving from private to state schools, is taken into account. 

The Conservatives also estimate that Labour’s plans to increase the rate of the Energy Profits Levy—also known as a windfall tax—will generate £5.2 billion. However, as noted by the Treasury, “the nature of the costing is uncertain” because it is based on future oil and gas prices which are “highly sensitive” to industry and commercial decisions. 

Image courtesy of Ken Teegardin