Are older, richer voters really against big spending? Maybe not as much as Labour fears | Economics

Labour has a demographic ­mountain to climb when it puts ­forward plans to spend only a few ­billions of pounds, let alone £28bn. The parliamentary ­constituencies the party must win from the Conservatives to secure an overall majority are overweight with older people who are resistant to change and want their government to watch the pennies.

Touting a pledge worth £18bn for green investments on top of £10bn already earmarked was always going to be vulnerable, especially when there was scant debate about how people might be affected, ­allowing speculation to escalate about its potentially deleterious effects.

Does Keir Starmer favour ­unfettered development when he says he will tear up the ­planning rules? Would a pylon or wind ­turbine appear near voters’ homes to satisfy the need for extra electricity?

The wealthy old want to hang on to a lifetime of gains, whether that is by maintaining the value of their home or by preventing their pension income from being taxed.

In the 2019 election, age was a strong predictor of how ­people voted. YouGov estimated the chance of someone voting Conservative increased by about nine points with every 10 years of age. Ipsos Mori found that the Conservatives had a 47-point lead among voters aged 65 and above. Meanwhile, Labour had a 43-point lead among voters aged 18-24 and a 24-point lead among voters aged 25-34.

Robert Ford, a professor of ­political science at the University of Manchester, says Labour’s baby boomer problem can be ­overplayed after a shift in attitudes to ­infrastructure spending since 2019.

Polling shows large majorities across all age groups when they are asked if they support government spending to repair and revive the UK’s infrastructure.

“You can see a crossover point in voting at age 60. So there is still a difference of opinion between the workforce and retirees,” Ford says.

“However, the public responds to conditions, and they can see that conditions – the fabric of the nation – have deteriorated. Surveys show the proportion of people in favour of extra spending is at a 20-year high.”

Ford believes a bigger problem is how Labour continues to suffer from a general perception that it is not good with money.

“It’s the baggage Labour always struggles with,” he says.

Shadow chancellor Rachel Reeves has tried to convince every ­audience she addresses of her ability to understand the economy with a run-through of her CV, beginning with the years spent as an economist at the Bank of England.

Yet such is the pushback, ­especially from newspapers ­representing an older demographic, that Reeves has taken fright, scaling back her ­spending plans to a level that means they won’t need to be funded by higher personal taxes.

Instead, a tax on oil and gas ­companies will pay for a programme of home insulation, while “tens of ­billions of pounds of ­private sector investment in green hydrogen, carbon capture, clean steel, renewable-ready ports and gigafactories will be unlocked through a new national wealth fund that will create half a million good, well-paid jobs”.

The wealth fund will also come without any call on taxpayers. Instead, the state will retain a share in the renewable assets in which it invests. In this way, the party hopes that the initial capital ­provided by the government for these ­projects will attract further private investment.

This switch to the state being a facilitator rather than the driving force is common across much of the west, where age-related inequalities in wealth have been growing.

Germany’s coalition ­government, led by Olaf Scholz’s Social Democrats, were defeated last year in an attempt to switch unspent Covid emergency funds into green infrastructure projects.

The ruling of the ­constitutional court denied the government a ­borrowing facility that would have ended a period of ­austerity under Angela Merkel’s leadership that matched the UK’s – and with similar damage inflicted on public infrastructure.

Scholz can only spend within strict debt rules, even though Germany has the lowest debt to gross domestic product (GDP) ratios of any major economy in Europe, at 60%. The UK’s was 97.7% in December 2023.

Labour members and green groups ask why a carbon copy of Joe Biden’s Inflation Reduction Act cannot be inserted into Labour’s manifesto. The act ­subsidises industries switching to low-carbon energy and works alongside, and overlaps with, the Bipartisan Infrastructure Law and the Chips and Science Act, which boosts the US semiconductor ­industry, at a total cost over 10 years of about $2tn (£1.57tn).

The answer lies in the resources of the US government, which are far larger and more robust than the UK’s, and how Biden’s subsidies are directed at US firms.

By contrast, the corporations ready to build giga-battery ­factories for the car industry and electric-powered steelworks in the UK are all foreign-owned.

Ford says translating a more enlightened public attitude into higher government spending needs younger people to vote.

“The brutal truth remains that as long as younger voters turn out at far lower rates than older voters, subsidising the old with the taxes of the young will be an electorally attractive proposition,” he says.

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