General Election 2019: City urges rethink over Labour’s ‘hostile’ manifesto
City figures have urged Labour to reconsider its combative position towards business and the City after Jeremy Corbyn revelled in the “hostility” his new manifesto would bring.
Corbyn unveiled his “radical” vision for a Labour government this morning, with a document setting out the details of how the party would pay for its spending spree, which will hit £82.9bn a year by the end of a five-year term.
Alongside pledges to scrap tuition fees and universal credit, embark on the biggest social housing programme since the 1940s and nationalise utilities including internet provision, Labour made it clear the City would be taking on the bulk of the financial burden.
“Our tax policy puts the responsibility for funding the fairer and healthier public realm we all need on the shoulders of those who can afford it: the super rich, companies who have benefited from tax cuts since 2010, the City, multinationals who hide their profits in tax havens, and those who
have benefited from the forest of tax reliefs that have sprouted up with barely any scrutiny,” the manifesto’s sister document, called Funding Real Change, says.
Labour plans to expand to existing financial transaction tax on shares to trading on other assets, including foreign exchange, interest rate derivatives and commodities.
The party said the tax, which it believes will raise £8.8bn, would be based on who does the trade rather than where the transaction takes place.
A Corbyn government is also planning to tax capital at the same rate as income, alongside raising the amount paid by those who earn more than £80,000.
Corbyn revelled in his banker-bashing manifesto, telling supporters in Birmingham that “the hostility of the rich and powerful is inevitable”.
But far from reacting “furiously” as he predicted, the City pointed out the consequences of Labour’s policies and urged greater collaboration.
Nick Burchett, co-fund manager at Cavendish Asset Management, said: “As for the planned attack on ‘bankers, billionaires and establishment’ – well the top one per cent of earners already shoulder 30 per cent of total income tax burden. If Labour sets a precedent for taxing this group further, top talent and inward investment into the UK will simply go elsewhere.”
Read more: Labour’s self-destructive manifesto will drive billions away from UK, business groups warn
Craig Kemsley, head of tax at legal firm Calibrate Law, said: “An exodus of wealth from the UK is already well under way and Labour’s populist tax plans will only catalyse this phenomenon… The losers will be the rest of the UK who will have to pick up more of the bill for the political parties spending promises.”
Adam Marshall, director general of the British Chambers of Commerce, urged Labour not to take a combative approach to business.
“No government can deliver the prosperity that people and public services depend on, or achieve net-zero, without a true partnership with business,” he said. “But command and control isn’t the way. Excessive intervention in business governance and sweeping tax rises would suppress innovation and smother growth.”
Read more: Capital gains hike to help fund £83bn spending spree
A spokeswoman for energy giant SSE also criticised the party for its divisive approach.
“This is a time for working together now to tackle the climate crisis, not waste years attempting a very costly, complex and controversial nationalisation,” she said.
Meanwhile AJ Bell’s senior analyst Tom Selby dismantled some of Labour’s assumptions – namely that the party’s “gargantuan promise” to freeze state pension age increases appeared to be uncosted. He also noted that Labour was “wrong” to say there has been a decline in life expectancy.
“The increase in the state pension age to 66 currently underway is the first increase since the Second World War, during a period when life expectancy across the UK has risen at unprecedented levels. If state pension increases are to be permanently shelved, Labour needs to explain who will pay the extra cost in the long-term.”
Main image: Getty