Labour’s new pledge – to wallow in economic orthodoxy

Rachel Reeves rules out wealth tax if Labour wins next election

Shadow chancellor also confirms Starmer leadership pledge to increase 45p top rate is off the table

Pippa Crerar, Political editor, Guardian, 27 Aug 2023

Rachel Reeves has gone further than before in explicitly ruling out Labour imposing a wealth tax if it wins the next election, as the party doubles down on its efforts to demonstrate economic competence.

The shadow chancellor confirmed that a Labour government would not bring in a mansion tax on expensive properties, increase capital gains tax or put up the top rate of income tax.

“We have no plans for a wealth tax,” she said. “We don’t have any plans to increase taxes outside of what we’ve said. I don’t see the way to prosperity as being through taxation. I want to grow the economy.”

Reeves also confirmed that Keir Starmer’s leadership pledge to increase the 45p top rate of income tax was – as was widely thought to be the case – now off the table, after he indicated in June that he was no longer keen on the idea.

Her remarks underline how Labour has decided that it needs to go further in blunting Conservative attacks, with party figures fearful that any hints of tax rises or unfunded spending commitments would be used to suggest it would be profligate with the nation’s finances.

There are also plans to go on the attack over Rishi Sunak’s stewardship of the economy, as internal polling suggests Tory-to-Labour switchers are irritated by his optimism on inflation when they do not feel that their own finances are improving.

Reeves’ words, in an interview with the Sunday Telegraph, also mark a shift away from her comments in September 2021 that “people who get their income through wealth should have to pay more”, highlighting those with stocks and shares and buy-to-let properties.

Labour has stepped up its focus on wooing the corporate sector, with the annual business forum hosted at the party’s conference this autumn over-subscribed by 75%, with 200 delegates due to attend, compared with 130 last year, and 150 on the waiting list.

Reeves was asked in the interview whether Starmer’s pledge to increase the top rate of income tax had been ditched. She replied: “Yeah … I don’t see a route towards having more money for public services that is through taxing our way there.

“It is going to be through growing our way there. And that’s why the policies that we’ve set out are all about how we can encourage businesses to invest in Britain.”

She added of the prospect of any form of wealth tax: “We won’t be doing that. It’s a denial.” A Labour source told the newspaper that her words also applied to “any form of mansion tax”, which the party proposed under Ed Miliband before the 2015 election.

As recently as the party’s conference last September, Starmer had said it was “hugely divisive” of ministers to hand out a tax cut to people who were paid more than £150,000, as he pledged to reverse the scrapping of the additional rate on the highest earners.

However, in June he said that he was “not looking to the lever of taxation” and would try to avoid imposing further tax increases beyond a list of smaller levies his party has already announced.

Labour has said it is still committed to scrapping non-dom tax status, closing a tax loophole enjoyed by a small number of private equity fund managers, adding VAT to private school fees and cracking down on tax avoidance.

The leftwing campaign group Momentum said on X, formerly known as Twitter: “Four people in this country have more wealth than 20 million Britons. Meanwhile, capital gains are taxed lower than income.

“This is a political choice to favour big business and the one per cent over ordinary people. Shameful.”

Top economists pile pressure on Keir Starmer to reverse Tory cuts

Prominent academics say they are concerned Labour’s programme will not break with Tory economic orthodoxy

The Independent, 28th August 2023

Top economists have piled pressure on Keir Starmer to break with Tory spending plans amid anxiety over Labour‘s policy direction if it wins the next election.

In a letter seen by The Independent, 70 prominent academics say they are “concerned” at the party’s programme for government and warn that failing to reverse cuts would “deepen the poverty and hardship many are already facing”.

Labour last month said its fiscal rules might not allow it to reverse cuts like the two-child benefit limit or bedroom tax, between them responsible for putting hundreds of thousands of families in poverty.

Shadow chancellor Rachel Reeves also announced she would be scaling back the party’s green investment plans, saying spending limits were “non-negotiable”.

The latest warning comes after Jim O’Neill, a prominent economist who coined the term BRICs and who until recently was advising the shadow chancellor, called for “petty and arbitrary” fiscal rules to be scrapped.

In a sign of shifting feeling in the discipline, the former Goldman Sachs chief, an ex-Tory, wrote that parties needed to focus on increasing investment rather than trying to balance the books by restricting it.

The latest letter, authored by economists and social policy experts, urges the opposition to revisit the “legacy of the last Labour government”, which they say was “achieved by increased spending on services like Sure Start and child benefit”.

The letter’s authors include South Korean “rockstar” economist Professor Ha-Joon Chang, as well as Professors Kate Pickett and Richard Wilkinson, the authors of the influential book The Spirit Level, which informed speeches by Ed Miliband when he was Labour leader.

Other signatories of the letter include Professor Brendan Burchell, president of Magdalene College at the University of Cambridge, and Professor Ruth Lister CBE, a Labour peer and emeritus professor of social policy as Loughborough University.

“We, the undersigned, are concerned that your current economic programme for government will not transform the economic orthodoxy that has made this country poorer, less cohesive and more unequal than fifteen years ago,” the letter says.

“The maintenance or extension of cuts in the current economic climate will only serve to deepen the poverty and hardship many are already facing.

“We believe it is the duty of an opposition to, where necessary, present an alternative vision for the future and when it comes to economics.”

The economists urge the opposition to move away “from an out of date, economically and socially destructive approach towards a model which improves wellbeing, works in alignment with our environment, and achieves social justice”.

They warn: “Failure to table an alternative will mean not only wasting that opportunity but many lives and futures as well.”

Asked to respond to the letter, a Labour spokesperson told The Independent the party would have to make “tough choices”.

Ms Pickett said: “We need our next government to have a clear vision to protect and promote the wellbeing of both people and planet. New economic models, based on social rights, are there to underpin an attractive and feasible future for the UK.”

The letter says reversing benefit cuts and raising spending on public services would not just help reduce poverty, but also on the wider economy, providing “a sturdy backbone to household finances” that would in turn stimulate growth – which has been at the core of Labour’s rhetoric.

The opposition has said that day-to-day spending will be completely covered by taxes and that the party will “get debt as a share of our economy falling by the end of the next parliament”.

Koldo Casla, director of the Human Rights Centre Clinic, and co-author of the letter, said: “In the face of global warming, harmful inequalities and rampant inflation, more than an opportunity, Labour has the historic responsibility of presenting a transformational alternative grounded on social rights.”