ALEX BRUMMER: What Labour isn’t telling before election
- Keir Starmer and Rachel Reeves borrowing heavily from Blair-Brown playbook
- They want no truck with Jeremy Corbyn’s ‘magic money tree’
- Or the late John Smith’s flawed tax raising budget plans of three decades ago
Keir Starmer and Rachel Reeves are borrowing heavily from the Blair-Brown playbook in the run-up to the next general election.
They want no truck with Jeremy Corbyn’s ‘magic money tree’ or the late John Smith’s flawed tax raising budget plans of three decades ago. The message is: No wealth taxes, Britain is taxed enough.
Those revenue raisers that are on the agenda may be anti-entrepreneurial but are limited in scope. Ending non-domiciled tax status will produce perhaps £3billion. Over time it could be easily outweighed by non-doms moving themselves to Monaco.
The gains from closing the windfall tax loopholes on North Sea oil are largely going to depend on a surging oil price and if it drives drillers off to lower cost locations in Africa it could end up being a net loser.
Lowering the pension savings cap from £1m is gesture politics. No one really knows what Labour has up its sleeve if it is serious about refitting the UK’s public sector, and making Britain a clean energy superpower. What we learn from the past is Labour will not reveal its money-raising plans ahead of the election.
In charge: Keir Starmer and Rachel Reeves are borrowing heavily from the Blair-Brown playbook in the run-up to the next general election
In 1997 a cabal of Gordon Brown, Ed Balls, entrepreneur MP Geoffrey Robinson and the now defunct audit firm of Arthur Andersen, spent weeks holed up in a suite in the Dorchester Hotel planning tax raids to pay for electoral promises.
Billions would be raised by abolishing the right of defined benefit pension schemes to be paid dividends tax free. A second target was to tax windfall gains by newly privatised energy utilities. It would be unsurprising if Rachel Reeves and her team are not working with tax experts to identify the equivalent of the 1997 raids.
The background is not as favourable as it was to Brown-Blair because of the parlous state of the public finances post-pandemic and Russia’s war against Ukraine. Tax revenues of 37 per cent of national income are at the highest level since the 1940s.
But there are plenty of ways for a canny Chancellor to boost income. The explosion in self-employed contractors in the UK partly has been driven by advantageous tax treatment. The freezing of thresholds by the Tories, pushing ever larger numbers of workers into higher bands, has made the system even more inequitable for those with no choice but PAYE.
The UK’s VAT system could also yield rich pickings. The Institute for Fiscal Studies argues up to £100billion is lost through loopholes and exceptions that have grown up. But the politician who attacks the privileges of national newspapers – which are exempt from VAT – will do so at their peril!
The biggest, boldest and perhaps most controversial treasure for an incoming Chancellor would be a new property tax, to displace council tax and stamp duty, which would capture capital gains from rising residential values, on an annual basis. That would almost certainly be a step too far for a Labour Party planning on serving more than one term in a property owning democracy.
We shouldn’t be gulled into thinking that Labour doesn’t have some wheezes up its sleeves. The Brown-Blair playbook tells us that tax policies missing from the manifesto are more critical than those pre-announced.