RUTH SUNDERLAND: Labour’s tax agenda is madness

The fiscal manoeuvre that Rachel Reeves is proposing in her October budget to fill the largely spurious “black hole” she claims to have uncovered in the public finances will no doubt be presented as targeting the rich, but will hurt the middle class the most.

The truly wealthy, including non-domiciled individuals and private equity partners, many of whom are from overseas, often have the option of leaving the UK.

The same is true of the CEOs of our major publicly traded companies, many of whom come from abroad and can work virtually anywhere they want.

Dubai, with its zero-rate income tax, is tempting for many, including young professionals and aspiring entrepreneurs.

Financial advisers who cater to wealthy clients say millionaires are looking to leave the country to protect their assets from our tax-hungry socialist masters, whose ranks include a slumlord and a delusional deputy prime minister (in Ibiza). For many of us, packing up and heading off to gilded exile is not an option.

Keir Starmer’s statement that “those with the broadest shoulders should bear the heaviest burden” is far from reality.

Moderately well-paid workers are already being hit by hidden taxes, introduced surreptitiously by the Tories but which Labour shows every sign of maintaining.

Thresholds and allowances have been frozen, rather than raised to keep pace with inflation. As a result, people are taxed more even though their real incomes have not risen, leaving them worse off in terms of living standards.

This “fiscal drag” will see one in five pensioners move into the highest rate tax band in the 2027/28 tax year. Figures obtained by financial firm Quilter show 2.7 million people aged over 60 will move into the 40 per cent band and almost half a million will cross the 45 per cent threshold.

Many more, who receive little beyond their state pension, will have to pay basic tax and file returns.

The loss of the winter fuel allowance adds insult to injury. It does not explain why pensioners should pay taxes that undermine them and keep their heating turned down while greedy train drivers gloat over Labour’s largesse.

Anyone who hopes to advance their career or invest in their family’s future is at risk of being punished.

Chancellor Rachel Reeves is considering raising capital gains tax rates in line with income tax rates.

This agenda is having unintended, but entirely predictable, consequences. Financial advisers are reporting a rush by investors to sell assets in anticipation of a possible rise in capital gains tax rates and a rush by entrepreneurs to divest from their companies.

If the tax benefits of saving into a pension are removed, people will save less for retirement, increasing the burden on the public purse.

If taxes on employment are increased, this creates disincentives for people to work and for companies (also concerned with the workers’ rights agenda) to hire staff.

None of this sounds very clever when Labour is aiming, in theory, to foster a pro-growth, entrepreneurial economy and get more of the 9 million-plus economically inactive people into work. Little wonder that the latest Institute of Directors survey shows that companies’ intention to invest and hire is falling sharply since the start of lockdowns.

With its gloomy narrative on the economy and its blinding enthusiasm for raising taxes, Labour is creating the impression that Britain is no place for the talented, the ambitious and the entrepreneurial.