You’re going to tax this. Well, that’s going to tax you. But you have a secret tax bomb. Well, you’ve already got it all figured out, and besides, you’re filthy stinking liars.
Apart from the resurrection of St Nigel, I suspect this is the most important takeaway from this week’s general election campaign for about 99.5 per cent of us.
It was a bit annoying to say the least. But despite all the chatter about taxes this week, it looks like Jeremy Hunt has actually hit the bull’s-eye, even if he’s not yet sure how. The arrow came at a typical campaign point yesterday when the Chancellor challenged his likely successor to rule out an increase in current property taxes.
Obviously, Rachel Reeves didn’t. And that’s because some Labor minds familiar with her thinking say this is exactly what she is likely to do in her first budget.
I hear she is keeping a close eye on a raft of wealth tax increases, and the introduction 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 terrible economic legacy. To pay for his own tax cuts (and set a dastardly trap for Labour), Hunt leaves them a very big hole in the public finances – to the tune of around £20 billion a year.
Current spending plans represent only a one percent increase in real terms across all departments. After inflation, bigger increases for health care and defense, plus the rising cost of interest on debt, all add up to most departments’ budgets being cut by as much as 3.5 percent 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 daily expenses. It is also certain that she will not want to introduce another wave of George Osborne-style austerity as her first act in power. Then taxes remain the only other way to fill the fiscal black hole.
Reeves wants to do no more business than the Tories already have, and Labor has already ruled out increasing the three big personal levies – income tax, national insurance contributions and VAT.
There’s only one big area we need to go after: wealth. And boy, is a lot of it stuck in British ownership at the moment? Our total housing stock is now worth a whopping £7 trillion
That leaves only one major area: wealth. And boy, is a lot of it stuck in British ownership at the moment? Our total housing stock is now worth a whopping £7 trillion.
The Council’s tax bands are long overdue for an overhaul. In England, governments have not dared to do this since 1991, so the highest rung – Band H – still applies to any house worth more than £320,000. That means modest homes in some cities pay the same as multi-million pound piles. Creating one or two more bands could make billions.
“It’s not technically difficult to do a revaluation now as the price of most people’s homes is already online,” says one well-informed Labor figure. “The tricky part is the politics of it all. It will be unpopular, but it makes sense and we can get away with it if we do it immediately. In five years everyone will have forgotten it.”
Reeves will also likely increase capital gains taxes to reap more from business owners who pay themselves in dividends. Moreover, it could also close a number of inheritance tax loopholes, such as on agricultural land, some of which are aimed at wealthy self-employed people – such as, astonishingly, the loophole that allows burdened law firms to pay zero national insurance contributions.
Labor then made the rich wet again; you would think an old play from the seventies.
The interesting thing is that an attack on wealth might not be a bad idea at all if – and it’s a big if – Reeves uses some of that new money to cut taxes on workers’ income at the same time. In other words: shift taxes from income to wealth.
Not only is this path defended by most economists, some centrist Tories have long advocated it – such as Lord Willetts, who now heads the Resolution Foundation think tank.
They claim that most of Britain’s current wealth is unearned. It’s because of the rise in home prices during our 50-year real estate boom. The cost of an average home in 2021 was 65 times higher than in 1970, while incomes increased only 35 times.
It’s fair on anyone’s books to work off a little bit of some significant piles of wealth, while allowing everyone to take home more of what he or she earns. It would also encourage more work and perhaps even make it easier to get into the housing market.
One thing: don’t expect to read about this in the Labor manifesto when it is published next week. As good as the policy is, it is far too fair to concede during a general election campaign.
This is why mandarins at the Foreign Office may not be sad about the departure of certain Tories…
There is relief in some of the more remote parts of the Foreign Office at the imminent departure of the Tory government.
Some former members have caused intense diplomatic headaches over the past fourteen years.
Ambassadors will not miss the minister who always had to be met on his plane in a wheelchair because he got so drunk during the flight.
Nor are any tears shed for the Tory MP’s trade envoy, who had to be taken from a brothel in a less salubrious part of the city – and apparently more than once.
But the prize for least missed certainly goes to the former Tory special adviser, who disgraced himself in somewhat spectacular fashion during a trip to Washington DC.
After a late night on the tiles, he vaulted the security walls of the ambassador’s beautiful Lutyens residence and fell ill on the floor of his drawing room.
Particularly disturbing was the fear that the ambassador’s neighbor on Observatory Hill would find out: the Vice President of the United States (for some time Joe Biden).
The diplomatic service remains discreet about names. At least for now.
Will their Labor successors, like equally pressured stress puppies on tour, behave better?
A British return to Brussels
Hundreds of millions of Europeans are voting for the election of a new European Parliament. The big story will be the expected victory of the far right. Less striking is the fact that a Briton was able to regain his seat in the Brussels chamber.
Sir Graham Watson was a member of the Lib-Dem parliament for twenty years, but is now a candidate in Italy – for the United States of Europe – thanks to his dual nationality.
Tom Newton Dunn is a political journalist and author