Labour lied. Now it’s going to tax Middle England into submission.
Reeves has given the game away. She will punish the prudent and successful to reward the feckless state
ALLISTER HEATH31 July 2024 • 
That was quick, even by the standards of today’s amoral, ultra-cynical politics, where the ends are seen to justify the means. It took Rachel Reeves just 25 days in office to admit that she will be increasing taxes in her first Budget, over and above all of the horrors already announced.
Sure, she will be sticking to the letter of Labour’s manifesto, but that disgraceful document must now be seen for what it was: a series of flagrant lies by omission, a shameless ploy to dupe voters into believing that the party had moderated. It did not give a true and fair view of the policies Labour will actually end up pursuing in the October Budget and later fiscal events, and many of the most significant non-financial decisions to date – the abhorrent cancellation of the Tory university free speech reforms, the despicable likely ban on arms exports to Israel – weren’t in the manifesto, either.
Income tax, National Insurance and VAT rates won’t be hiked for now, but every other levy is up for grabs, especially all of those that the party kept maintaining “it had no plans” to touch. Dissembling, much? What will happen to capital gains tax, to inheritance tax, to pension tax relief, to council tax, to Isas? What new taxes will be invented? Will we end up with an actual wealth tax?
The Government promised that it wouldn’t put up taxes on “working people”, yet millions who work, often very hard, are about to be clobbered, often for the sin of having built up too many assets to get on to the housing ladder, to look after children and families, or in readiness for old age. Most will feel that they have been played by a brazenly dishonest Government that hides behind legalistic verbiage.
What is most galling is that Reeves continues to take us for fools: instead of admitting that she wants to spend more, she is pretending to have discovered a black hole in the public finances. Yes, the Tories adopted tough assumptions about future spending. But all of this was well-known to the Labour team, as was the cost of the now cancelled Rwanda scheme – there was no mysterious, unaccounted for “gap” large enough to justify a fresh tax grab.
The inescapable conclusion is that Labour remains a party enthralled by class warfare. It seeks to take rather than create, to coerce rather than incentivise, to control and regulate and tax all that moves. It divides the country into two classes: its friends, the “good” people, and its enemies, the “bad” people. Its mission is to hammer the latter pitilessly while helping the former in every way possible, partly out of misplaced ideological conviction and partly to buy votes.
Woe betide if you fall in the “wrong” category, if you work too hard, are too thrifty, too prudent, too successful, too productive or too entrepreneurial: the Labour Party is coming for you, for your income, for your capital gains, for your school fees. “Unearned” income, a Marxist concept that demonises the proceeds of investment, including dividends, interest, rents and capital gains, is deemed inherently suspicious, as opposed to “earned” income from salaries and wages, which is “good” as long as there isn’t too much of it.
But if you are a member of the “working people”, that amorphous category which includes some who work and others who do not, you will be just fine. Take junior doctors: they will be enjoying a 22 per cent pay rise over two years as a down payment before the next strike, paid for by raiding the pockets of supposedly less-deserving folk.
This simplistic neo-Manichaean worldview, derived from a combination of Labour’s pre-Blairite class-struggle heritage fused with self-righteous woke ideology of more recent import, will be a disaster for the country. It is also the best prism through which to understand Reeves’ plans. I happen to agree with one of her decisions – the scrapping of the winter fuel payment for most pensioners – but it fits into this pattern, and of course Labour claimed last month that it had “no plans” to change the benefit’s eligibility.
Asset-rich pensioners who made sure they have plenty of savings fall into the “enemy” class, and will also be ripe for much higher taxes, a vindictive and incentive-destroying move designed to punish those who strive to reduce their reliance on the state. Even the new homes targets – more in the “bad” shires, fewer in “good” London – smacks of the same Manichaean approach.
So far, two of Reeves’ preannounced tax attacks – on private schools, and on non-doms – have materialised in the most brutal form possible, and the attack on private equity will doubtless be equally ruthless. Her repugnant raid on schools will commence at the earliest possible moment, on January 1. Education is tax-free in almost all countries. New Zealand is the notable exception, and only because it charges a flat 15 per cent sales tax on almost all goods and services, including food and university fees; as the Adam Smith Institute notes, the NZ government pays a compensatory subsidy to lower and mid-priced independent schools. Britain stands alone in its vindictiveness.
The state was set to confiscate 37.1 per cent of GDP in tax on Tory plans, its highest level since 1948. Reeves will break records. The damage will be immense. High taxes are bad for growth, a lesson the Tories, to their great discredit, have forgotten and that Labour cannot even countenance.
Attempts at equalising outcomes come at a severe opportunity cost. Higher taxes reduce the payoff from work, investing, setting up a business or accumulating assets, and discourage the behaviours that are conducive to greater national prosperity and individual autonomy. Steeper taxes allow the state to increase in size, which also cuts growth: a bigger welfare state traps more people in dependency, and public services come with abysmal productivity and greater malinvestment.
Yet it isn’t just the wasted GDP that is so galling. The loss of trust will be almost as pernicious. The Government proffered endless non-denial denials about proposed tax increases, and has now admitted that it is about to turn the screws on Middle England. How can it expect the public to believe it on anything else ever again? DT.
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