You’ll tax this. Well you’ll tax that. But you’ve got a secret tax bombshell. Well you’ve already taxed the pants off everything, and you’re dirty stinking liars to boot.
Saint Nigel’s resurrection aside, I suspect that’s the sum takeaway from the general election campaign this week for about 99.5 per cent of us.
To put it mildly, it’s been somewhat tedious. Yet in all the confected noise about tax this week, it looks like Jeremy Hunt did actually hit a bullseye, even if he doesn’t quite know how yet. The arrow came yesterday in a typical campaign punt when the Chancellor challenged his likely successor to rule out raising any of the current taxes on property.
Pointedly, Rachel Reeves didn’t. And that’s because some Labour big brains familiar with her thinking say this is precisely what she is most likely to do in her first Budget.
She is, I hear, looking very closely at an array of tax increases on wealth, and the creation of new council tax bands for more expensive homes is at the top of her list.
First, the why. Sir Keir Starmer and Reeves face a truly dire economic inheritance. To pay for his own tax cuts (and lay a dastardly trap for Labour), Hunt is bequeathing them a very big hole in the public finances — to the tune of about £20 billion a year.
Current spending plans mean just a one per cent increase in real terms for all departments. After inflation, bigger rises for health and defence, plus the soaring cost of debt interest, it all adds up to most departmental budgets getting slashed by up to 3.5 per cent a year, according to the Institute for Fiscal Studies. So big cuts to the police, courts, railways, and the arts.
Reeves has already promised not to borrow more for day-to-day spending. It’s also a certain bet that she will not want to introduce a new wave of George Osborne-style austerity as her first act in power. That leaves tax as the only one other way to fill the fiscal black hole.
Reeves doesn’t want to tap up business any more than the Tories already have, and Labour have already ruled out raising the big three personal levies — income tax, national insurance contributions and VAT.
There’s only one big area to go after: wealth. And boy, is there a lot of it tied up in British property at the moment. Our total housing stock is now worth a cool £7 trillion
That only leaves one big area to go after: wealth. And boy, is there a lot of it tied up in British property at the moment. Our total housing stock is now worth a cool £7 trillion.
Council tax bands are well overdue an overhaul. In England, governments haven’t dared touch them since 1991, so the highest rung — Band H — is still for any home worth more than £320,000. That means modest dwellings in some cities pay the same as multimillion-pound piles. Creating one or two more bands could raise billions.
“It’s not technically difficult to do a re-evaluation now, with the price of most people’s houses already online,” says one knowledgable Labour figure. “The tricky thing is the politics of it all. It will be unpopular, but it’s logical and we’ll get away with it if we do it immediately. Everyone will have forgotten about it in five years’ time.”
Reeves is also likely to raise capital gains tax to reap more from company owners who pay themselves in dividends. Plus she may also close some inheritance tax loopholes, such as on farmland, and some enjoyed by the well off self-employed — like, amazingly, the one that allows loaded law firm partners to pay zero national insurance contributions.
Labour soaking the rich again then; an old play from the Seventies you may think.
Here’s the interesting thing, a raid on wealth may be no bad idea at all if — and it’s a big if — Reeves uses some of that new money to reduce tax on workers’ earnings at the same time. In other words, shift tax from income onto wealth.
Not only is that trajectory championed by most economists, some centrist Tories have also long argued for it — such as Lord Willetts, who now runs the Resolution Foundation think tank.
They argue that most of the UK’s current wealth isn’t earned. It’s from house price appreciation over our 50-year property boom. The cost of an average house in 2021 was 65 times higher than in 1970, while earnings have only gone up 35 times.
Creaming a bit off some quite substantial wealth piles while allowing everyone to take home more of what they earn is fair in anyone’s books. It would also greater incentivise work, and may even make getting on the housing ladder easier.
Just one thing, don’t expect to read about this in Labour’s manifesto when it’s published next week. As good a policy as it is, it’s far too honest a thing to admit to during a ya boo sucks general election campaign.
This is why mandarins in the Foreign Office may not be sad at the departure of certain Tories...
There is relief across some of the more far-flung parts of the Foreign Office with the imminent departure of the Tory government.
A few of its former members have caused some intense diplomatic headaches over the last 14 years.
Ambassadors will not miss the minister who always had to be met at his plane with a wheelchair, because he’d get so drunk on the flight out.
Nor are tears being shed for the Tory MP trade envoy who had to be extracted from a brothel in a less salubrious part of town — and more than once apparently.
But the prize for the least missed surely goes to the former Tory special adviser who disgraced himself somewhat spectacularly on a trip to Washington DC.
After a late night on the tiles, he vaulted the security walls of the ambassador’s stunning Lutyens residence and proceeded to be sick on his drawing room floor.
Of particular consternation was the fear that the ambassador’s next door neighbour on Observatory Hill might find out: the Vice President of the United States (for some time, Joe Biden).
The diplomatic service is remaining discreet over names. At least for now.
As equally pressured stress puppies on tour, will their Labour successors be any better behaved?
A British return to Brussels
Hundreds of millions of Europeans are voting to elect a new European Parliament. The big story will be the expected triumph of the far-Right. Less noticed is the fact that a Brit could get his seat back in the Brussels chamber.
Sir Graham Watson was a Lib-Dem MEP for 20 years, but is now running in Italy — for its United States of Europe Party — thanks to his dual nationality.
