Everyone Wants a Wealth Tax – Apart From Labour’s Wealthy Donors

Rishi Sunak is embroiled in a skirmish about having left yesterday’s D-Day celebrations early in order to make it back to the UK in time for an interview with ITV News; meanwhile, rows about Labour’s candidate selection rumble on. But while the Conservatives and Labour find themselves bogged down in problems of their own making, both parties may in fact be a little relieved that media attention has focused so far on the personalities – and not the policies.

This won’t last long, however. Because once the manifestos drop, there’ll be one question on everybody’s lips: how are you going to pay for all the stuff you’re promising?

First, the government. Since the Tories are expected to lose, and lose bigly, they can afford to play fast and loose with their pledges. Tax cuts? You bet. More defence spending? Absolutely. Mansions for every Brit in Narnia? Just say where you want the unicorn stables. Combining the proposed tax cuts for pensioners and parents alone will cost the Treasury about £3.7bn by 2029-2030, though the Tories say much of this could be recovered by clamping down on tax avoidance. Perhaps they could start with their own MPs.

The Institute of Fiscal Studies has accused the government’s spending plans of being “a work of fiction” – proposed cuts to civil service staffing go nowhere near freeing up the dosh necessary to increase defence spending to 2.5% of GDP, fund the NHS workforce plan, and expand free childcare provision. You can’t pay down the national debt at the planned rate *and* cut taxes *and* increase spending all at the same time – the sums don’t add up.

None of this matters very much. To put it bluntly, Sunak can basically promise any old shite. Why? Because, unless Keir Starmer gets hit by a meteor, Sunak & co. aren’t going to have to follow through on any of it. Their only objective is to shore up their core vote of older homeowners after Liz Truss nuked the Tory electoral coalition with a mini-budget which ended the era of low interest rates.

So let’s turn to Labour. The party has leaned hard on Rachel Reeves’ credentials as a serious beancounter, and the shadow chancellor has promised one of the most “pro-growth” Treasuries in history. There will be, should Labour win, some reforms to how HMT operates – fewer fiscal events, a single budget every year, and a new borrowing target. But when it comes to the big stuff, like what the debt target should be, Reeves is indistinguishable from her Tory counterpart.

As the Institute for Government (who are hardly a bunch of Maoists) point out, this will “severely constrain capital spending, unless she is willing to raise taxes or cut day-to-day spending even further”. When pressed on the matter by Rory Stewart (again, not a Maoist) on The Rest Is Politics, Reeves became rather tetchy, attacking the Tory record on national debt rather than talking about Labour’s own vision.

Labour’s manifesto may well contain some big surprises. But so far, Starmer and Reeves have rejected calls for a wealth tax, been silent on equalising capital gains tax with income tax, and the proposed VAT bill on private schools, windfall tax, and abolition of non-dom status are small sums compared to the spending needed to repair public services after 14 years of austerity. The International Monetary Fund has warned of a post-election black hole of £30bn – and there’s little clarity on how Labour plans on filling it.

Simply repeating that you’ll “grow the economy” isn’t a plan – it’s wishful thinking, with a side of trickle-down economics. The question is how you’ll grow the economy, what role the state will play in investment, and where the trade-offs will be. Tax rises don’t have to be paid for by working people. A 1-2% wealth tax on assets over £10m would raise up to £22bn a year, according to Tax Justice. Bringing CGT in line with income tax would net the Treasury up to £15.2bn a year. And as Frances Ryan points out, this isn’t exactly a vote loser. According to YouGov, 78% of the electorate support an annual wealth tax on the super-rich, including 77% of Tory voters.

Everyone wants a wealth tax – apart from Labour’s wealthy donors.

The article was adapted from our newsletter The Cortado. For more general election analysis straight into your inbox, click here.