- If elected, Labour will almost certainly bring in hefty tax rises in its first budget
- Manifesto says nothing overt about wealth taxes
- But it is an idea that is gaining currency in liberal/Left circles
What is left out of election manifestos is always as important as what is trumpeted.
That is the case with Labour’s bid to woo voters with its promises on the economy.
First, let’s concede that the manifesto makes some sensible points.
These include the observation that under the Conservatives there has been constant chopping and changing on business taxes. Corporation tax has changed 26 times. No wonder firms hesitate when making investment decisions.
Let’s also concede that some of the accusations levelled at Labour on tax are probably ill-founded. The party, for instance, has denied it will go down the electorally suicidal route of imposing capital gains tax on the sales of family homes, as some Tories have suggested.
No laughing matter: If elected, Labour will almost certainly bring in additional hefty tax rises in its first budget
But there will be other nasty tax rises.
As the Institute for Fiscal Studies points out, there is a ‘conspiracy of silence’ about the country’s true situation, in which all three major parties are complicit. To meet targets on reducing national debt, there will need to be tax rises or cuts in public spending.
This is an unpalatable message. The tax burden is already at its highest since the 1940s and services are under huge strain.
Tax rises are already baked in the cake. A freeze on allowances and thresholds that are normally increased to keep pace with inflation will bring in an additional £11billion a year until 2028/29. Labour is not reversing this Tory policy.
If elected, Labour will almost certainly bring in additional hefty tax rises in its first budget. This is what happened in 1992, 2010 and 2021 under the Tories and the Coalition.
With Labour, it is likely to involve a vengeful and counter-productive attack on the wealthy and also the middle class.
The Labour manifesto says nothing overt about wealth taxes.
But it is an idea that is gaining currency in liberal/Left circles. It features in the Green Party agenda and Gary Stevenson, the self-styled YouTube economics guru, is an advocate.
The revenue-raising plans that are mentioned in the Labour manifesto – aimed at non-doms, private schools and private equity barons – point clearly in that direction.
Many, including me, have no sympathy with private equity asset strippers who gorge on UK companies while paying far too little tax. But attacking them now, when the City is losing status as a global financial centre, is bad timing.
While it is all very well for Labour’s class warriors to set out to punish the rich, this is a mere softening-up exercise for a full-blown assault on the middle classes.
Pensions may be productive for Reeves. She might cut tax relief for higher earners or go after the tax-free lump sum.
She has – for now – stepped away from reinstating the pension lifetime allowance. This penalised moderately well-off savers such as doctors or headteachers with a super-tax if their investments performed well.
Reeves and her boss Sir Keir Starmer claim there is a way to balance the books without increasing taxes, fudging the debt target or cutting services: growth.
Wouldn’t that be wonderful? Yes, but growth takes time, maybe five or ten years unless the country enjoys a big stroke of luck – the equivalent of finding North Sea oil, say.
Problem is, luck works both ways. We might just as easily have another shock such as Covid.
In any event, socialist finger-crossing does not amount to an economic policy. Brace yourselves.