ALEX BRUMMER: What Labor isn’t telling you before the election

Keir Starmer and Rachel Reeves are borrowing heavily from the Blair-Brown playbook ahead of the next general election.

They don’t want to be bothered by Jeremy Corbyn’s ‘magic money tree’ or the late John Smith’s flawed budget plans of thirty years ago. The message is: no wealth tax, Britain is taxed enough.

The revenue boosters on the agenda may be anti-entrepreneurial, but they are limited in scope. Ending the tax status of non-domiciled residents may save £3 billion. Over time, this could easily be offset by non-doms moving themselves to Monaco.

The profits from closing tax loopholes on North Sea oil will largely depend on a rising oil price and if this drives drillers to cheaper locations in Africa, it could end up being a net loser.

Reducing the pension savings cap from £1 million is gesture politics. No one really knows what Labor has in store if it is serious about reshaping Britain’s public sector and turning Britain into a clean energy superpower. What we learn from the past is that Labor will not reveal its fundraising plans before the election.

In 1997, a cabal of Gordon Brown, Ed Balls, entrepreneur MP Geoffrey Robinson and the now defunct accountancy firm Arthur Andersen spent weeks in a suite at the Dorchester Hotel planning tax raids to pay for election promises.

Billions would be raised by abolishing the right of defined benefit plans to receive tax-free dividends. A second objective was to tax windfalls from recently privatized energy companies. It wouldn’t be a surprise if Rachel Reeves and her team don’t work with tax experts to identify the equivalent of the 1997 raids.

The backdrop is not as favorable as for Brown-Blair due to the dire state of public finances after the pandemic and Russia’s war against Ukraine. Tax revenues of 37 percent of national income are at their highest level since the 1940s.

But there are plenty of ways a smart chancellor can increase his income. The explosion in the number of self-employed people in Britain is partly due to favorable tax treatment. The Tories’ freezing of thresholds, pushing ever-increasing numbers of workers into higher brackets, has made the system even more inequitable for those who have no choice but PAYE.

The UK VAT system could also yield rich returns. The Institute for Fiscal Studies says that up to £100 billion has been lost due to loopholes and exceptions that have been created. But the politician who attacks the privileges of national newspapers – which are exempt from VAT – does so at his own risk!

The biggest, boldest and perhaps most controversial treasure for a new chancellor would be a new property tax, replacing council tax and stamp duty, which would capture the capital gains from rising house prices on an annual basis. That would almost certainly be a step too far for a Labor party planning to serve more than one term in a property-owning democracy.

We should not get carried away into thinking that Labor has no short-sightedness up its sleeve. The Brown-Blair playbook tells us that the tax policies missing from the manifesto are more important than those announced in advance.