ANDREW NEIL: Prepare for the largest tax raid in historical past

Only three brief months since the 2024 General Election and already we can safely consign pretty much everything Labour had to say about tax during the campaign to the dustbin of history.

It’s not just that what Labour told us, po-faced, with faux honesty and performative serious demeanour, has turned out to be untrue. In many cases it was the opposite of the truth – in other words, barefaced lies – as we will find out to our cost come its first Budget on October 30.

We were assured Labour’s plans for extra spending were modest and fully costed – that there was no need to increase taxes overall, bar a few small, specific rises, such as VAT on school fees.

Yet, in under two weeks, we will be landed, in cash terms, with the biggest tax raid in history – to be piled mercilessly on top of what is already the highest tax burden for 70 years.

We were promised there would be no rise in taxes for ‘working people’. Now we learn Chancellor Rachel Reeves is likely to whack up fuel duty by £5billion, which looks suspiciously like a tax on working people (just ask white van man).

We were told, categorically, there would be no increase in national insurance contributions (NICs). Now Reeves is slavering over a £12billion increase, probably the biggest single tax rise in her upcoming Budget. That is another tax on working people.

Oh, no it’s not, claim economically illiterate Labour ministers. Only employers’ national insurance contributions will rise and we never ruled that out.

In fact, the manifesto made no distinction between employers’ and employees’ NICs. It simply ruled out a rise in NICs, period.

To say employers will now have to pay more is at the least a sleight of hand, if not another downright lie. It’s also another tax on workers.

The consensus of economic research is that a rise in employer payroll taxes reduces job creation and pay rises. It is, after all, a tax on jobs, leaving companies with less money to hire more or pay more. So working people will pay.

Don’t take my word for it. Take it from Reeves when she was Shadow Chancellor and captains of industry were still beguiled by her.

This is what she said when then Chancellor Sunak increased employers’ NICs in 2022: ‘When the Chancellor announced his NICs rise, he and the prime minister argued it was fairer because half would be paid for by employers. But evidence that employees will be hit twice shows just how poorly thought through their tax hike is.

‘It is the worst possible tax rise at the worst possible time and will hit businesses and working people across our country… We need to boost British businesses and opportunities for employees – not place yet another burden on them both.’

Wise words. But junked now she’s in charge and needs a barrowload of cash to keep the Labour tribe happy. Though you might think this is another ‘worst time’ to raise employer NICs when you’re also telling the world you’re open for business.

Yet another U-turn from a government making us dizzy with its growing volte-faces.

Consider how Labour thinks it can take us for fools with its ever-changing, self-serving narrative. Elected on a supposedly ‘fully-costed’ manifesto and promising no major tax rises, within weeks of getting her feet under the Treasury desk Reeves claimed to have discovered a £22 billion fiscal black hole left behind by the dastardly Tories.

It was all so much hokum. At least 40 per cent of the so-called black hole had been dug by Reeves herself by doling out massive public sector pay rises. Most of the rest had been common knowledge during the campaign. The Tories had left the public finances in a tight fiscal straitjacket. The Office for Budget Responsibility opined that there was an element of ‘fiction’ about the spending projections.

The Institute for Fiscal Studies identified the need for at least £16billion more in spending if ‘unprotected’ departments (i.e. not health or defence) were to avoid real spending cuts.

Labour knew all this even as it campaigned for our votes. But, like the Tories, it was politically convenient to ignore unpalatable fiscal news which might involve spending cuts or tax rises.

When pressed on what it would do, Labour side-stepped the questions. But once safely in power, Reeves affected to be surprised by the ‘black hole’ – even if nobody else was.

It gave her a pretext to search for the big tax rises Labour had hitherto insisted were unnecessary. But it hasn’t stopped there.

Now the talk is of tax rises and spending cuts totalling £40billion – with tax rises doing the heavy lifting at £35billion. Note that Reeves isn’t claiming she needs an extra £35billion in tax because that notorious Tory ‘black hole’ has suddenly doubled in size.

She’s going for broke because she wants to lavish extra spending on the NHS, public sector workers and whatever other pork-barrel spending keeps the Labour grassroots happy. You don’t remember a dicky-bird about this during the election? That’s because it wasn’t mentioned.

So much for all that pre-election talk about fiscal restraint and financial discipline on which Reeves dined out with City financiers who were gullible enough to believe her.

There will be a self-imposed spending rule: current spending on day-to-day things like wages will eventually have to be matched by revenues and not paid for out of borrowed money. But that hardly restrains spending. It merely encourages her to jack up taxes to pay for it.

And there will be plenty more borrowing, too. By tinkering with various technical definitions of public debt and fiscal deficits, Reeves hopes to borrow billions to invest in public infrastructure wheezes, some of which will make us more productive but many of which will be just so much money wasted (you only need look at Ed Miliband’s uneconomic green initiatives).

So, there we are. The truth at last. Keir Starmer assured us his would not be a traditional borrow, tax and spend Labour government. But it is, with knobs on.

New taxes will be piled on existing record taxation. Public spending is close to record highs, at 45 per cent of our GDP. But we’re going to spend yet more.

The budget deficit is still 4 per cent of GDP and the national debt 100 per cent of GDP. But we will borrow yet more, which is a surefire way of keeping interest and mortgage rates unnecessarily high.

Britain is already paying more to borrow over ten years than most equivalent advanced economies. If it borrows even more, the cost can only rise.

It’s already close to where borrowing costs were during the ill-fated Liz Truss interregnum, which Labour loves to disparage.

Nobody should be surprised by any of this. Starmer is often a stranger to the truth.

He became Labour leader in 2020 on a Corbynista prospectus – everything from widespread nationalisation to the abolition of university tuition fees – which he quickly junked wholesale when he was safely party boss.

He won the election promising to be prudent with taxing, spending and borrowing. And has now ditched all that just as quickly as he did his short, convenient flirtation with Corbynism.

The hallmark of Starmer’s political career has been to say whatever he thinks it will take to get elected. Then renege on it in a heartbeat.

Who knows what promise he’ll break next? The Falklands or Gibraltar, after his unnecessary giveaway of the Chagos Islands? The effective rejoining of the European Union by gradually kow-towing to Brussels regulations? Cuts to the defence budget?

But even this master of ducking and diving will struggle to get himself out of the bind he is now in. Starmer has told us ad nauseam that higher economic growth is the driving mission of his government.

Regard that as the next promise to be broken.  I know of no previous example, here or abroad, of a £35 billion increase in taxes being the precursor to stronger growth.

It is on that rock that Labour’s lies will come unstuck.