Rachel Reeves’s spiteful Budget will impoverish the nation
As Rachel Reeves prepares for her first Budget with every passing day, another wheel seems to come off her revenue-raising plans.
The Chancellor’s squeeze on non-dom status might cost the Treasury money, the Office for Budget Responsibility has reportedly warned. Raising capital gains tax too much could reduce the tax take by £2bn, HM Revenue & Customs has cautioned. If VAT on school fees pushes more parents than expected into the state system, that too could raise little.
Some might argue that if these policies are revenue-shredding, the Chancellor will surely rethink them. I wouldn’t be so sure. Such an analysis assumes that Labour supports tax rises on the affluent and wealthy because that is where they think money can be squeezed.
That is probably wrong; as the highest earning 1pc already pay 29pc of all income tax, we might be near the point where there is little left to juice without provoking a mass exodus – and thus, an actual drop in the Exchequer’s income.
But what if the purpose of such proposed tax increases is not revenue maximisation? With the exception of the Blair interregnum, two broad ideologies have been wrangling for the Labour soul.
One is Clause IV socialism – the principle that was enshrined in the Labour constitution until 1995 that the party’s aim was to secure the “common ownership of the means of production, distribution and exchange”, i.e. mass nationalisation. This tradition came back to the fore under Jeremy Corbyn and lives on in Labour’s planned, on-the-cheap renationalisation of the railways and Ed Miliband’s net zero boondoggle Great British Energy. But it is largely vanquished.
The alternative Labour tradition, playing centre-stage since at least Anthony Crosland’s 1956 treatise, The Future of Socialism, is that the party’s leitmotif is not state ownership but equality of both opportunity and, more importantly, outcome. To many on both the Labour Left and Right, someone who departs from both these strands is not really part of the family any more.
Tony Blair found this out during the 2001 general election. Asked by Jeremy Paxman on Newsnight if there was a maximum it was decent for anyone to earn, the then-prime minister replied: “It’s not a burning ambition for me to make sure that David Beckham earns less money.” It is no exaggeration to say that many on the Left saw this as every bit as much of a betrayal as his decision a little more than a year later to send British troops to fight in Iraq.
That refreshing episode of Labour’s history is dead and buried. Even Peter “I’m intensely relaxed about people getting filthy stinking rich” Mandelson atoned for his earlier laissez-faire remarks as long ago as 2012. Over the last decade and a half the whole thrust of Labour thinking – the one thing that all the warring factions can agree on – is that inequality is what matters.
This has been reinforced by tomes such as Richard Wilkinson and Kate Pickett’s 2009 The Spirit Level, arguing that – from obesity via depression to crime and road deaths – pretty much all the world’s ills can be attributed to inequality.
It was given ballast by French economist Thomas Piketty, with his attempted rehabilitation of Karl Marx’s immiseration thesis, i.e. that the rich accumulate while the rest slip into relative penury. And the argument has been endlessly promoted by the Resolution Foundation, seemingly the BBC’s favourite think tank, backed by a £50m endowment from an insurance tycoon.
This is the mindset that Labour’s MPs have deeply imbued. It explains why onslaughts on wealth have such appeal to the Left even when they are economically illiterate. Labour’s tax hikes may be less about raising money or even redistributing wealth than simply ensuring there are fewer rich people around for the rest of us to envy. And they may be remarkably successful at that.