The recent general election campaign, in sharp contrast to the previous two, contained little discussion of the government’s finances. This is despite the fact that two main parties were much further apart on the deficit than in the previous two elections. In 2010 and 2015 the Conservatives and Labour both wanted to reduce the deficit: the disagreement was over the size and pace of fiscal consolidation. By 2017, Labour’s plans would not reduce the deficit any further, while the Conservative manifesto implied the period of austerity extending through to the middle of the next decade.

Further deficit reduction over the next two parliaments would potentially provide two benefits: lower debt interest spending and greater scope to increase borrowing should another adverse shock occur. A cost of deficit reduction would be a rising tax burden or cuts to spending as a share of national income: the Conservative party’s plans imply both.