- If elected, Labor will almost certainly introduce steep tax rises in its first budget.
- The Manifesto says nothing overt about wealth taxes
- But it is an idea that is gaining followers in liberal/left circles.
What is left out of electoral manifestos is always as important as what is trumpeted.
That is the case with the Labor Party’s attempt to attract voters with its promises on the economy.
First, let’s admit that the manifesto raises some sensible points.
These include the observation that under the Conservative government there have been constant cuts and changes to business taxes. Corporate tax has changed 26 times. It is not surprising that companies hesitate when making investment decisions.
Let us also admit that some of the accusations leveled against the Labor Party over taxes are probably unfounded. The party, for example, has denied that it will follow the electorally suicidal path of imposing a capital gains tax on sales of family homes, as some Conservatives have suggested.
It’s no laughing matter: if elected, Labor will almost certainly introduce hefty additional tax rises in its first budget.
But there will be other unpleasant tax increases.
As the Institute of Fiscal Studies points out, there is a “conspiracy of silence” about the true situation of the country, in which the three major parties are complicit. To meet national debt reduction targets, taxes will need to be raised or public spending cut.
This is an unpleasant message. The tax burden is already at its highest level since the 1940s and services are under enormous pressure.
Tax increases are already on the cake. A freeze on allocations and thresholds normally raised to keep pace with inflation will generate an extra £11bn a year until 2028/29. The Labor Party is not reversing this Conservative policy.
If elected, Labor will almost certainly introduce hefty additional tax rises in its first budget. This is what happened in 1992, 2010 and 2021 under the Conservatives and the Coalition.
In the case of the Labor Party, it is likely to involve a vindictive and counterproductive attack on the rich and also on the middle class.
Labour’s manifesto says nothing overt about wealth taxes.
But it is an idea that is gaining followers in liberal/left circles. It is on the Green Party agenda and Gary Stevenson, the self-proclaimed YouTube economics guru, is a supporter.
The revenue-raising plans mentioned in Labour’s manifesto – aimed at non-dominants, private schools and private equity tycoons – clearly point in that direction.
Many, including me, have no sympathy with the private equity asset strippers who gorge themselves on UK companies while paying very little tax. But attacking them now, when the City is losing its status as a global financial centre, is bad timing.
While it is all very well that Labor’s class warriors are out to punish the rich, this is a mere softening exercise for a full-blown attack on the middle classes.
Pensions can be productive for Reeves. You could reduce the tax relief for higher earners or opt for the tax-free lump sum.
For now, he has refrained from reinstating the lifetime pension. This penalized moderately well-off savers, such as doctors or directors, with a supertax if their investments performed well.
Reeves and his boss, Sir Keir Starmer, say there is a way to balance the books without raising taxes, upsetting the debt target or cutting services: growth.
Wouldn’t that be wonderful? Yes, but growth takes time, perhaps five or ten years, unless the country enjoys a big windfall (the equivalent of finding oil in the North Sea, say).
The problem is that luck works both ways. We could also suffer another shock like Covid.
In any case, crossing your socialist fingers does not equate to an economic policy. Get ready.