- If elected, Labour is almost certain to impose big tax increases in its first budget.
- There is no mention of a wealth tax in the manifesto.
- But it’s a view that is becoming more and more prevalent among liberals/leftists.
What is not in an election manifesto is always as important as what is advertised.
This is exactly what the Labour Party is trying to do to win voter support with its economic pledges.
First, let’s acknowledge that the Manifesto makes some sensible points.
This includes the observation that business taxes have been constantly changed under the Conservative government – corporation tax has changed 26 times – so it is no wonder that businesses hesitate to make investment decisions.
We will also accept that some of the accusations levelled at Labour on tax are probably unfounded. For example, Labour denies that it would undertake the electoral suicide act of imposing capital gains tax on the sale of family homes, as some Conservative members have suggested.
This is no laughing matter: if Labour is elected, it will almost certainly introduce significant tax increases in its first budget.
But there will be other tax hikes that are troublesome.
As the Institute for Fiscal Studies points out, there is a “conspiracy of silence” about the true state of the country, in which all three major parties are complicit. Achieving the goal of reducing the national debt will require either higher taxes or cuts in public spending.
This is an unacceptable message: tax burdens are already at their highest since the 1940s and services are under huge strain.
Tax increases are already built into the plans – freezing allowances and tax limits which normally rise in line with inflation will bring in an extra £11 billion in revenue each year until 2028/29 – and Labour has no intention of reversing the Conservative policy.
If elected, Labour is almost certain to impose further large tax increases in its first budget, as happened in 1992, 2010 and 2021 under Conservative and coalition governments.
Labour is likely to launch a vengeful and counterproductive attack on the middle class as well as the wealthy.
The Labour manifesto makes no mention of a wealth tax.
But it’s an idea that’s gaining traction among liberal/leftists, having been featured on the Green Party’s policy agenda and advocated by self-proclaimed YouTube economics guru Gary Stevenson.
The revenue-raising plans outlined in Labour’s manifesto, targeted at non-residents, private schools and private equity tycoons, clearly point in that direction.
Many people, including me, have no sympathy for the private equity asset strippers who prey on British companies while paying little to no tax, but this is poor timing to attack them as the City is losing its status as a global financial centre.
It’s fine that Labour’s class warriors are trying to punish the rich, but this is just a warm-up for a full-scale attack on the middle class.
Pensions could be productive for Reeves. She could cut tax cuts for high earners or go for a tax-free lump sum.
For now, she has backed away from restoring pensions for life, a scheme that would have penalised moderately well-off savers such as doctors and school principals by levying excess tax if their investments performed well.
Reeves and her boss, Sir Keir Starmer, argue that growth is the way to balance the budget without raising taxes, fudge debt targets or cutting services.
Wouldn’t that be great? It is, but it takes time to grow — probably five to 10 years, unless the country has some great stroke of luck equivalent to discovering North Sea oil.
The problem is that luck works both ways: we could easily encounter another coronavirus-like shock.
Either way, socialist fingers crossed will not be economic policy. Be prepared.
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