Labour’s tax raid is an act of spectacular dishonesty
Warming up for the Budget in the Commons yesterday, Rishi Sunak and Keir Starmer engaged in a civilised, warm exchange in honour of the former’s final outing as Leader of the Opposition. They joked about cricket, Yorkshire and life as a constituency MP.
Within a couple of hours, Sunak was back on his feet delivering one of his strongest Parliamentary performances, lambasting the Labour government for unveiling an eye-watering array of tax rises that far exceed anything they set out in their manifesto.
Before the election, Starmer said “our plans do not involve tax rises over and above the ones we’ve set out in relation to non-dom status and private equity loopholes, VAT on private schools and a windfall tax on oil and gas companies.”
Well, those tax hikes emerged, along with a raft of new ones including a £25bn annual raid on employers national insurance, punchy hikes to Capital Gains and higher levies on inheritance, stamp duty on second homes, vaping and, for good measure, private jets.
Taken together they represent an act of spectacular dishonesty by the government, whose claims that new taxes were needed to fill a £22bn fiscal blackhole left by the previous government were seriously undermined by the Office for Budget Responsibility which refused to endorse the theory at a press conference yesterday.
Beyond taking the tax burden to unprecedented levels, the Chancellor also announced a borrowing binge amounting to £28bn more than previously planned for 2025/26 alone. The government hopes that pouring this money into public services and investment will stimulate growth, and the OBR agrees that it will, in the short term, through what the IFS describes as “a sugar rush.”
But as they go on to make clear, the government will need “to get lucky on growth” if they want to avoid coming back with another round of tax rises in a couple of years’ time. Labour based their entire electoral pitch on the promise of growth and now, just months into office, they’re relying on luck to get them there while businesses fund the experiment.
It’s a pitiful state of affairs and one that might very well start to unravel – whether through higher inflation, bruised businesses or perhaps just the political consequences of taking the country for fools.