TONIGHT, the rich can sleep easy in their beds.
Labour has ruled out a wealth tax if it wins the next general election.
And to make it absolutely clear, shadow chancellor Rachel Reeves has emphasised that Labour would not increase the top rate of income tax.
Reeves chose the Telegraph to give her personal pledge. “I don’t have any spending plans that require us to raise £12 billion. So I don’t need a wealth tax or any of those things,” she said. “We have no plans for a wealth tax.”
And if any doubt remained, she said the party leadership had jettisoned Keir Starmer’s pledge, made when he was campaigning to become Labour leader, to increase the top rate.
In effect Labour is proposing to maintain the Tory policy of taxing consumption rather than income or wealth.
This naturally falls unequally on people with the least wealth and lowest incomes.
Compared to Labour’s present plan and even after she reduced income tax rates in her first Budget, Margaret Thatcher maintained a 60 per cent top rate. At present earnings over £125,140 are taxed at 45 per cent.
For more than 50 years, progressive taxes on income and wealth have been reduced and regressive taxes — VAT and National Insurance contributions — have been increased
Labour has set its face even against the Trades Union Congress tax policy which calls for a “modest” wealth tax on the richest 140,000 people in Britain which, says the TUC, could raise more than £10 billion to help pay for public services.
TUC research suggests that a “one-off wealth tax” of 1.7 per cent on people with assets above £3 million, rising to 3.5 per cent for those with more than £10m, “could deliver a £10.4bn boost for the public purse.”
This, the TUC says, affects only the richest 0.3 per cent.
The first of Starmer’s 10 pledges when running to succeed Jeremy Corbyn was to “increase income tax for the top 5 per cent of earners.”
With this U-turn Labour Party chair Anneliese Dodds, who Starmer sacked as shadow chancellor when he promoted Reeves to that position, completed the demolition of her reputation for careful good sense with the nonsensical claim that “Labour has been clear that we will not impose a wealth tax and that’s been our policy for some time.”
To this she added that Labour would take difficult choices around taxation, “because we do think we need to have a tax system that’s fair for working people and that supports economic growth.”
What these “difficult” choices might entail if Labour has abandoned a shift towards taxing the rich and their wealth is not hard to see. It means cuts in public expenditure and or increased regressive taxes on working people.
The idea that maintaining or increasing the wealth of the richest results in a “trickle-down effect” and, as Dodds suggests, “supports economic growth” is thoroughly discredited.
The British capitalist system depends on investment income and capital gains being taxed at lower rates than income from work.
In a recent study the London School of Economics wealth tax commission concluded that a one-off wealth tax was preferred over increasing taxes on work or spending.
A one-off wealth tax on millionaire couples paid at 1 per cent a year for five years, they found, would raise £260bn.
By way of contrast Reeves’s spending plans rise not even to a modest £12bn.
Labour’s latest policy reversal is the clearest sign that Starmer’s electoral strategy hinges on assuring the rich and powerful that neither their wealth or power is threatened by Labour.
This is Westminster Labour’s new philosophy of never-ending poverty for working people.
