Fiscal responsibility will be key for a new Labour government if the party wins this week's general election, experts have said.
Isabel Albarran, investment officer at Close Brothers Asset Management, said following Liz Truss's disastrous mini-budget in 2022, neither Labour or the Conservatives propose unfunded spending increases.
She said for this reason, "fiscal probity" remains in vogue.
Labour's manifesto includes a fiscal rule that the current budget must move into balance, and debt must fall as a percentage of GDP by the fifth year of the budget forecast.
Albarran said: "This doesn’t offer a great deal of room to expand investment spending without raising taxes."
Despite this, the party has ruled out raising tax rates, instead saying it would raise £7bn a year by 2028-29 through closing loopholes and tackling tax avoidance.
"These revenues would fund modest increases in public services spending, such as increasing the number of NHS appointments, recruiting 6,500 additional teachers and extending breakfast clubs to all primary school pupils," said Albarran.
"However, given that current spending plans assume real term cuts, further spending increases will be needed to avoid cutting spending. Labour identify £1.5bn of efficiency gains in current budgets, which can be reallocated, but more is likely needed. This will have to be addressed by the end of the year, under the Spending Review."
Ahead of the election, M&G looked at whether a new government could encourage investors back to the UK.
The firm said: "After a period of extended volatility, investors will be looking for a government that can deliver stability and recognise the benefits that private capital can bring to the investment needed in the country - as long as that capital can earn a reasonable return.
"Stability – if delivered – could bring benefits to the UK listed market, and this will particularly be the case if there is upheaval, turmoil or simply uncertainty in Europe and the UK."
It agreed that Labour's tax pledges could come under pressure over time, depending on economic growth.
M&G said: "Ambitious goals to be the fastest growing country in the G7 will need spending support from government and the private sector.
"A potential roll back on tax pledges in key areas such as capital gains may be a real possibility. It is also possible that the Treasury under Rachel Reeves leadership seeks to raise taxes in areas hitherto undisclosed and undiscussed.
"We should not rule out the potential for more targeted corporate taxes and there remains the possibility that areas of the market like the banking sector which are already subject to specific taxes see these increased.
"Finally, the personal balance sheets of consumers are in reasonable shape currently but the potential for higher interest payments on mortgages and the potential for higher personal taxation means consumer spend is likely to remain somewhat constrained, albeit perhaps not as constrained as some of the more bearish commentators might suggest."
