Labour are taking taxpayers for a ride
JOSEPH DINNAGE
There’ll be little for CapX readers to celebrate this month as we begin to feel the impact of the Chancellor’s many and varied tax hikes. As if Britons weren’t squeezed tightly enough already – our tax burden is now at its highest since the Second World War – Rachel Reeves announced a raft of painful new levies at the Autumn Budget. From vehicle excise duty to air passenger duty, taxes are rising this month in just about every way you could imagine. Yet even more sinister are the tax rises instituted by stealth.
One of the worst of these insidious measures is the Government’s freeze on income tax thresholds, which we will now endure for even longer than we originally thought. Having initially promised not to, at last year’s Budget Reeves extended the freeze to income tax thresholds first put in place by the Conservatives until at least 2031. For families already struggling amid sky-high bills, this is downright cruel.
As the economist Gerard Lyons wrote in these pages following the Budget, this will force 780,000 more people into paying basic rate tax, 920,000 into the higher rate and 4,000 up to the additional rate. This is truly a tax on ambition. Not only are Labour making it harder for people to enter the labour market with their job-killing Employment Rights Act, they are now actively disincentivising those lucky enough to be in work from seeking a pay rise or promotion. Talk about being ‘laser-focused’ on growth.
Inheritance tax – widely known as the ‘death tax’ – is perhaps Britain’s most loathed levy. Rather than look to cutting IHT, or indeed abolishing it entirely, Labour have either frozen the thresholds or, for certain businesses, restricted relief from this pernicious charge.
The new tax year, in just a few days time, brings frozen inheritance tax thresholds for individuals: £325,000 for the nil rate band and £175,000 for the residence nil rate band, regardless of any potential rise in property and asset values. The wealth management group Rathbones estimates that over 3,500 estates could face inheritance tax bills of over £500,000 by the end of this tax year, up from 2,520 estates in 2021/22.
Meanwhile the ‘family farm tax’ – which also comes into force this month – caps the agricultural property relief long-enjoyed by Britain’s farmers at assets worth £2.5 million for individuals and £5 million for couples. Even though we are now seeing a watered-down version of the original policy, which would have capped relief at assets with a combined value of £1m, it remains a crushing blow, particularly for large farms who still cannot afford to weather this tax raid.
It’s all a far cry from the comforting promises the Labour Party made in the run-up to the general election (then again, the inverse correlation between this Government’s pledges and reality have at least made life more predictable). No tax increases for ‘working people’, business was no longer to be a dirty word and promoting growth was to be the foundation of the Government’s economic strategy. What have we got instead? A party that came into government with no plan – preferring instead to glide into power off the back of Tory failure – which retreated with pathetic immediacy to the safety of its worst instincts when confronted with economic hardship and backbench rebellion.
Despite all the evidence that NHS reform is essential to transform patient outcomes (the UK’s healthcare outcomes rank poorly in international league tables), we continue to pour billions into a system that isn’t working. Rather than start to meaningfully means-test benefits for the elderly and tackle unnecessary expenditure in the welfare system more broadly, the Government watered down its flagship Welfare Bill to appease the socialists on its backbenches.
The next election is approaching at frightening speed, and there is a battle underway on the Right to provide the fiscal steer to set our economy back on course. Reform UK are starting to ditch some of their more interventionist instincts and Kemi Badenoch’s Conservatives have been clear since the election that they will take a radical, liberalising approach to the economy. Whoever comes out on top, they will have to prove that they are prepared to make hard decisions about public spending and treat taxpayers with the respect they deserve. Unlike our current Government.
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This article (Labour are taking taxpayers for a ride) was created and published by CapX and is republished here under “Fair Use” with attribution to the author Joseph Dinnage
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