Will it really do the party any good to go back down this 1970s rabbit hole of taxing the wealthy merely on the basis that they are wealthy?
Source - Daily Telegraph - 24/03/23
It's the easiest trick in the political book: to point an accusing finger at an opponent and suggest they should be paying more tax. Ordinary people pay a larger marginal tax rate than the Prime Minister, after all – think of the children!
In the Labour Party such rhetoric is expected and welcomed. No MP ever became less popular with the comrades for suggesting that the wealthy should pay more than they already do, and the fact that they already pay a disproportionate level of income tax is rarely acknowledged.
So Angela Rayner was performing her John Prescott tribute act yesterday by offering a scathing analysis of the Prime Minister’s “much delayed” tax return (if Rishi Sunak’s is much delayed, how do we describe Keir Starmer’s, which was published a day later?).
Labour cannot afford to be complacent on this issue, whatever the polls suggest about its prospect of victory at the next general election. It is easy to play to an approving audience of party activists by pledging to “soak the rich”, but Rayner’s statement threatens to raise a Labour bogeyman that was thought consigned to history. The most toxic label that can be attached to the Labour Party is “high tax”.
The argument over Sunak’s income is misleading. Labour’s complaints are against his benefiting from capital gains tax (CGT). He is privileged to earn such a large income from capital gains, an experience alien to most of us. But despite Rayner’s claims, Sunak is subject to exactly the same rates of income tax as anyone else – just as the rest of us, were we wealthy enough, and had we invested to the same degree as Sunak, would benefit from precisely the same rates of CGT.
In fact, it was under Labour that one of the biggest cuts ever was applied to CGT, when Gordon Brown dropped the rate from 40 per cent to 18 per cent for all taxpayers, irrespective of income. But that was then and this is now. There is a significant degree of the politics of envy at play here, along with a cynical attempt to encourage feelings of resentment among those who have been hardest hit by the cost of living crisis.
After Rayner suggested a Labour government should raise taxes on savings and investment, her boss, Keir Starmer, did nothing to dampen down such an expectation. How this will sit with the shadow chancellor, Rachel Reeves, is unclear; she has spent a lot of time reassuring the City and investors that a future Labour government will be good for them, and sets great store by Labour’s reputation for sound economic management.
Will it really do the party any good to go back down this 1970s rabbit hole of taxing the wealthy merely on the basis that they are wealthy and others are not? Have the lessons learned by Tony Blair and Gordon Brown been so quickly unlearned?
The party is already in some difficulty over its ideological opposition to the lifting of the cap on tax-free pensions savings, a move likely to encourage NHS consultants either to postpone their retirement or return to the workforce. Labour decided that scrapping the cap was too high a price to be paid for the dividend of saving lives in the NHS and cutting waiting times for operations.
If the same logic applies to future decisions on raising capital gains tax and other investment, Labour could find itself presiding over an economy from which large investors are fleeing, resulting in far lower revenues than at present. But if the party has calculated that the approval of their activists is worth that cost, then they will proceed in this new direction.
Essentially, Labour always finds it difficult to escape its base instincts. They seek to generate outrage at Rishi Sunak, not because of the rate of tax he pays but because he is wealthy. And wealthy, successful people should have no place in Parliament: they certainly have no place in some parts of the Labour Party.
Is that really the message Starmer wants to send out? Perhaps it is, and perhaps he can win on that basis. But it will take very little time in office for the truth to sink in that wealth, and wealthy individuals, is something Britain PLC cannot do without.
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