By chance, in the last few days I ran into a friend, a wealthy, lifelong Labor supporter and donor.
In a brief exchange, he noted that there was much to fix for the next government, particularly health and public services. Then came the sting.
That could only happen if Labor raised taxes. Never mind that income, which represents 37.9 percent of national output, is at record peacetime levels.
Now that Labor has reaffirmed its superiority at the polls in the council elections and the South Blackpool by-election, it will be difficult to escape intense attention on what a party of Keir Starmer and Rachel Reeves will do in power.
Saint or sinner?: Shadow chancellor Reeves has been intent on building a reputation for fiscal rectitude
Shadow chancellor Reeves has been intent on building a reputation for fiscal rectitude.
She was key to thwarting Ed Miliband’s ambition to spend £28 billion a year on a green revolution. As for income, she has been content to spin the dials. She has estate taxes ruled out.
However, his campaign against people with non-domiciled tax status (a policy partly stolen by the Conservatives) and attack on the charity status and VAT privileges of independent schools are precisely in that area.
If there is a common theme around what she and the Labor Party are proposing, it is closing the loopholes used by the rich and wealthy companies.
The intention to remove tax exemptions for new investments in the North Sea falls into this category.
Bank interest windfalls, from deposits held at the Bank of England, could also be an easy target.
Knowing Reeves’ interest in what is happening on the other side of the Atlantic, it would be surprising if he had not detected the comments of the IMF’s fiscal chief, Vitor Gaspar.
Speaking at recent spring meetings in Washington, he argued that closing loopholes could be the best approach for Western nations seeking to get their finances in order after the impacts of the pandemic and Russia’s aggression in Ukraine.
History tells us that when new brooms arrive at the Treasury, there is always a black hole.
Former Labor Party chief secretary Liam Byrne left a now-legendary note in 2010 for his coalition successor David Laws, saying: “There is no money.” Good luck!’
In 1997, Gordon Brown inherited relatively benign public finances from his Conservative predecessor, Ken Clark.
Brown came well prepared with secret tax plans to finance his valuable projects: a tax on privatized electricity companies and a raid to close a loophole that allowed UK pension funds to receive tax-free dividends.
Pre-election promises and manifesto promises are like dust when the books are opened. Loopholes, a favorite of Reeves, offer plenty of opportunities to ramp up the agony.
It has already identified £5bn to be raised from tax evaders. The general belief is that this is largely made up of the “big boys” employing the best advice.
Easy wins: Pensions are easy choices, as Gordon Brown and subsequent chancellors discovered.
The reality is that it is the self-employed person, sole trader or small business owner, struggling to make ends meet and sloppy with record-keeping, who is on the front line.
Pensions are easy options, as both Brown and subsequent chancellors discovered. Generous tax breaks, which benefit higher-income earners more than lower-income earners, could be considered a loophole.
Treasury orthodoxy has long regarded such breakups with disdain. Therefore, removing tax relief for high-income taxpayers or reintroducing the £1 million pension cap are obvious places to look.
Another tax riddled with loopholes is VAT. Last year, the Institute for Fiscal Studies, a think tank cited with reverence by Labor politicians, argued that big chasms in the UK system (rather than loopholes) mean there is a £100bn gold mine. pounds to loot.
This is easier said than done, as George Osborne discovered when he tried to impose VAT on some environmental foods in 2012: the so-called pasty tax.
We can pay VAT on healthcare facilities, but there is a whole range of financial services, one of the most important sectors of the economy, that escape the payment of VAT.
Reeves is sensibly silent on such ideas. But it’s what he doesn’t tell us, more than the public pronouncements, that should alarm hard-pressed voters.