Does Rishi Sunak think we’re stupid?

Rishi Sunak
Whatever Rishi Sunak says about an economic recovery being on the way, none of us feel richer - Thomas Trutschel/Photothek

“Mark my words, Labour will raise your taxes – it’s in their DNA,” shouted Rishi Sunak at the first leaders’ election debate.

For what it’s worth, Sunak is right – whoever wins the election will have to raise taxes, either by bluntly hiking rates or more sinisterly by freezing or reducing allowances.

But what is beginning to grate is the Conservatives’ tax-raising mud slinging that makes no recognition of the party’s own tax rises over the past 14 years.

Take capital gains tax (CGT).

This is a levy on profits made on shares held outside of a pension or Isa, investment properties and other assets. Left-wingers have long eyed up the billions of pounds that could be raised by raising the tax paid on so-called “unearned” income with the income tax rates workers pay via PAYE.

We know that Rachel Reeves, our soon-to-be chancellor, and other Labour frontbenchers would privately like to raid capital gains, though they are not so stupid as to admit so before a historic majority is secured.

And of course, Rishi Sunak was able to pay just 23pc tax on £2.2m of earnings in 2022-23 because the bulk of that was capital gains, meaning it was taxed at just 20pc rather than 45pc as would be the case if it was classed a normal income.

Being able to say Labour was forcing the prime minister, who is worth £650m at the last count, to “pay his fair share” would play well to its core voters.

But Tory claims that Labour is eyeing up CGT on family homes (known as “private residence relief”) are, as Sir Keir Starmer said, desperate. If you’ll believe Labour is thick enough to do that, I’ve got some magic beans to sell you.

The most galling thing about the apocalyptic predictions of Labour attacks on capital gains – which may yet be proved right – is that the Tories have already raised CGT. And this wasn’t years ago, it was in April.

The Tories will tell you that they cut the CGT rate on second homes sales from 28pc to 24pc in April, which is true. But they have also slashed the annual tax-free exemption, from £12,300 in 2022-23 to just £3,000 for the current tax year. The CGT rate on profits from share sales remains 20pc.

In 2009, at the end of New Labour’s reign, a profit of £100,000 (of either property or shares) would have attracted CGT of £16,182. This tax year, the same person (assuming they are a higher-rate payer) would pay CGT of £23,280 on a property or £19,400 if it was shares.

Whichever way you spin it, that’s a tax rise. Sunak’s problem is that whatever he says about an economic recovery being on the way, or the promise of future tax cuts, none of us feel richer – quite the opposite.

The Tories are right to warn that tax rises are coming under Labour. And the Conservatives should know: the stealth raid on our earnings started years ago.

No, Labour is not going to cut the high taxes we pay today, but voters won’t forget that it was the Conservatives that put them there.