Again in March, Rachel Reeves made a telling intervention at Prime Minister’s Questions. As Richard Burgon, the Corbynite MP for Leeds East, demanded a wealth tax rather than incapacity profit cuts, Reeves shook her head with the vigour of somebody who plainly regarded this as a horrible concept.
But 4 months later, the air is thick with speak of Labour adopting simply such a measure. After Neil Kinnock proposed a tax of two per cent on property value greater than £10m, No 10 and No 11 had the prospect to rule this selection out – and refused to take action. Heidi Alexander, the Transport Secretary, would solely say yesterday that the tax was not mentioned “instantly” on the cupboard’s Chequers away day. What’s modified?
For one factor, tax must be far more central to Reeves’ subsequent Price range than she ever needed. Final November she advised the Confederation of British Trade’s convention that “public companies now must dwell inside their means” and that “I’m not coming again with extra borrowing or extra taxes”. You received’t hear the Chancellor, who might face a £20bn-£40bn black gap, repeat such language now.
However a Kinnock-style wealth tax isn’t going to occur for 2 causes. First, it could make the UK a definite outlier at a time when Reeves is striving to take care of worldwide competitiveness (in keeping with Sky Information, of the 38 OECD nations solely Colombia, Norway, Spain and Switzerland levy internet wealth taxes). Second, HMRC lacks the information on property and pensions required to introduce a normal wealth tax (and it could take a number of years to ascertain a brand new system).
But it fits Labour to take care of ambiguity over this concern. It avoids one other public row with the celebration’s gentle left, of which Kinnock is the founding father, and it additionally permits Reeves to shock enterprise on the upside when she delivers that Price range.
However whereas the Chancellor received’t be introducing a wealth tax, she can be taxing wealth extra. That a lot is assured by the federal government’s resolution to take care of Labour’s manifesto pledge to not increase revenue tax, VAT and Nationwide Insurance coverage on employees. “There’s rather a lot else that could possibly be carried out to not tax people who find themselves very economically insecure for the time being,” a No 10 aide tells me.
What might that imply? Choices being explored by the Treasury embrace increased taxation of dividends via an increase within the 39 per cent charge or the abolition of the £500 tax-free allowance – as floated in Angela Rayner’s once-dismissed memo – and a web based betting tax (as proposed by Gordon Brown in his New Statesman guest edit), in addition to an increase within the financial institution income levy.
Pension tax reduction may be curbed for increased earners and a few even speculate whether or not Reeves may introduce a brand new high charge of revenue tax (which, they argue, wouldn’t quantity to a technical manifesto breach).
Right here is the political problem for Labour. The panoply of measures to be introduced this autumn will lack the totemic standing of a wealth tax at the same time as, to echo Denis Healey, there are “howls of anguish” from the wealthy. For proof of that, recall Reeves’ first Price range which imposed quite a few taxes – on non-doms, farmers, non-public colleges and personal jets – however resulted in much more political ache than acquire. Can the Chancellor reverse this dynamic? Right here is one check of whether or not she will revive her fortunes.