Labour’s red tape will throttle our economy

Labour has published its manifesto, but is still failing to level with the public about the true cost of its plans. So far, attention has mostly been focused on the tax rises we can expect under a government led by Sir Keir Starmer. Yet a new analysis from the Institute of Economic Affairs shows that the sweeping regulatory changes promised by Starmer will also load tens of billions in additional costs on Britain’s hard-pressed businesses, landlords and car-owners.

The IEA identifies more than 60 ways in which Labour has promised to add to the existing tangle of red tape. Despite receiving less attention than Labour’s tax policies, they are likely to impose even more significant costs.

For instance, overturning Rishi Sunak’s decision to delay the ban on the sale of new petrol and diesel cars is projected to cost £1,000 per household annually from 2022 to 2050. Insisting that privately rented homes hit minimum energy standards by 2030 could cost another £12.2 billion.

Meanwhile, the country remains in the dark about which taxes Labour will raise in order to fund its spending commitments. The party claims these will be funded by their decision to load extra taxes on energy companies, private schools and non-doms. But this in turn implies a willingness to follow Conservative plans to cut government budgets once in office, and the public is clearly unconvinced. This may well explain why Prime Minister Rishi Sunak’s warning that Sir Keir will raise taxes appears to have touched a nerve.

The Labour Party has already been forced to pledge not to raise the rates of income tax, VAT, corporation tax and National Insurance. That has now been joined by a vow not to impose capital gains tax on the sale of primary residences.

But this still leaves plenty of potential targets in the party’s sights. As chancellor, Rachel Reeves could increase capital gains tax on other transactions, whack up fuel duty or add new council-tax bands, to name only a few. Pension rules may well be in the firing line, perhaps by bringing pensions within the scope of inheritance tax.

Wherever the financial pain ends up falling, Labour’s existing plans suggest that it is likely to do real damage to the wider economy.

The Education Secretary has branded Labour’s decision to impose VAT on private-school fees as “reckless”. It risks devastating knock-on effects on the local communities around existing schools, while state schools will struggle to accommodate pupils squeezed out of fee-paying education.

Separately, it has now been suggested that Labour’s attack on non-doms may fail to deliver as much additional revenue as hoped. And the urban preoccupations of Labour activists mean that Britain’s farmers are barely mentioned in the party’s manifesto – a lack of concern the Conservatives argue treats rural areas with “nothing but contempt”, and could well see a Labour government leaving our farming industry “in tatters”.

Starmer talks about increasing growth and prosperity. But by playing to the narrow prejudices of Labour’s base while increasing red tape, the tax burden and attacks on the well-off, he looks set to achieve the exact opposite.