by you will criticize this. Well you will criticize that. But you have a secret tax bomb. Well you have already criticized the pants for everything, and you are dirty stinking liars to boot.
St Nigel’s resurrection aside, I suspect that’s the takeaway from the general election campaign this week for about 99.5 per cent of us.
To put it mildly, it was a bit tedious. But with all the secret noise about tax this week, it looks like Jeremy Hunt has hit a bull’s eye, even if he doesn’t know how yet. The arrow came yesterday in a typical campaign pound when the chancellor challenged his likely successor to rule out raising any of the current property taxes.
Rachel Reeves certainly didn’t. And that is because some big Labor brains familiar with her thinking say this is precisely what she is most likely to do in her first Budget.
She is looking closely, I hear, at a range of wealth tax increases, with the creation of new council tax bonds for more expensive homes at the top of her list.
First, the reason. Sir Keir Starmer and Reeves face a tough economic legacy. To pay for his own tax cuts (and lay a terrible trap for Labour), Hunt is handing them a huge hole in the public finances – around £20 billion a year.
Current spending plans only involve a one percent increase in real terms for all departments. After inflation, more increases in health and defence, as well as the rising cost of debt interest, all add up to a reduction of up to 3.5 per cent a year in most departmental budgets, according to the Institute of Fiscal Study. So big cuts to the police, the courts, the railways and the arts.
Reeves has already pledged not to borrow any more for day-to-day spending. She will also certainly not want to usher in a new wave of George Osborne-style austerity as her first act in power. This leaves tax as the only other way to fill the fiscal black hole.
Reeves does not want to benefit from business more than the Tories already have, and Labor has already ruled out raising the big three personal levies — income tax, national insurance contributions and VAT.
There is only one big area to go after: wealth. And boy, is there a lot of it tied up in British property right now. Our total housing stock is now worth £7 trillion
That leaves only one big area to go after: wealth. And boy, is there a lot of it tied up in British property right now. Our total housing stock is now worth £7 trillion.
An overhaul of the council tax bonds is overdue. In England, governments have been reluctant to touch them since 1991, so the highest band – Band H – remains for any house worth more than £320,000. That means modest properties in some cities pay the same as multi-million pound properties. Creating one or two more bonds could raise billions.
“It’s not technically difficult to do a revaluation now, with the price of most people’s homes already online,” says one knowledgeable Labor figure. “The tricky thing is all the politics. It won’t be popular, but it’s logical and we’ll get through it if we do it right away. Everyone will have forgotten about it in five years.”
Reeves is also likely to raise capital gains tax to get more from owners of companies that pay themselves in dividends. It may also close some inheritance tax loopholes, such as on farmland, and others enjoyed by the beneficially self-employed — like, remarkably, the one that allows law firm partners to make zero contributions pay national insurance.
Labor mocking the rich again then; an old drama from the seventies you might think.
Here’s the interesting thing, maybe a raid on wealth isn’t all bad news if – and it’s a big deal – Reeves uses some of that new money to reduce taxes on workers’ earnings at the same time. In other words, shift tax from income to wealth.
Not only is that trajectory being promoted by most economists, some central Tories have 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 is undeserved. It is from house price appreciation over our 50 year property boom. The cost of a typical house in 2021 was 65 times higher than in 1970, and earnings increased only 35 times.
It is fair in anyone’s books to extract more from some rather large piles of wealth and let everyone take home more of what they earn. It would also encourage more work, and it might even make it easier to get on the housing ladder.
For one thing, don’t expect to read about this in the Labor manifesto when it is published next week. As good a policy as it is, it is far too honest to let it in during a general election campaign ya boo sucks.
Which is why Foreign Office mandarins might not be sad to see some Tories go…
There is relief throughout some of the most remote parts of the Foreign Office that the Tory government is about to leave.
Several of its former members have had severe diplomatic headaches over the past 14 years.
Ambassadors will not miss the attention that was always hit by his plane with a wheelchair, because he would be drunk on the flight out.
There are no tears being shed either for the Tory MP trade envoy who had to be removed from a brothel in a less-than-despicable part of town – and apparently more than once.
But the prize for least lost certainly goes to a former Tory special adviser who embarrassed himself on a trip to Washington DC.
After a late night on the tiles, he leaned against the security walls of the ambassador’s magnificent Lutyens residence and lay sick on the floor of his living room.
Of particular concern was the fear that the ambassador’s next-door neighbor on Observatory Hill would find out: the Vice President of the United States (Joe Biden for some time).
The diplomatic service remains discreet about names. At least until now.
With equally stressed puppies on tour, will their Labor successors be any better?
The British return to Brussels
Hundreds of millions of Europeans are voting to elect a new European Parliament. The big story is the expected victory from the far right. Less noticeable is that a Briton could get his seat back in the Brussels chamber.
Sir Graham Watson was a Lib-Dem MP for 20 years, but is now operating in Italy — for his Party in the United States of Europe — thanks to his dual nationality.
Tom Newton Dunn is a political journalist and author
