Opinion
Abandoning a wealth tax is a ruinous Labour strategy. It’s ‘Blairism without the cash’
Owen Jones
Mon, 28 August 2023
Photograph: Christopher Furlong/Getty Images
When a British politician discusses “tough choices”, they invariably reveal whose side they are really on. A tough choice tends to involve emptying the pockets of those with little, or slashing a service ordinary citizens depend on. When Labour committed to retain the Tories’ two-child benefit cap – which drives hundreds of thousands of children into poverty – this was styled as a tough decision. Note, however, that raising taxes on the thriving rich is never described as such, even though such a commitment inevitably triggers coordinated hysteria from Tory politicians, rightwing media outlets and wealthy interests. Refusing to do so is the easy way out: it is the very opposite of a tough decision.
When Labour’s shadow chancellor, Rachel Reeves, rules out a wealth tax – or indeed other means of asking the well-to-do to contribute more – she underlines the political cowardice of the opposition. The party has been courting the support of big business in a so-called “smoked salmon and scrambled eggs” offensive, and is determined not to offend them. It’s not just any vestige of Corbynism that Labour’s masters wish to expunge: its leading thinkers believe that the party lost under Ed Miliband in 2015 because it was insufficiently deferential to corporate Britain. This is belied by the actual evidence: polling back then revealed that 42% of voters had considered the party to be too soft on big business, with just 22% believing it too tough. But Labour’s desire to genuflect before the powerful trumps all other considerations.
For anyone concerned about the state of the country after 13 years of ruinous Tory rule, this should cause alarm. Reeves rebuts the need for a wealth tax by announcing she doesn’t “have any spending plans that require us to raise £12bn worth of money”. Any politician who claims to be able to fix a country facing multiple overlapping crises without spending a lot of money is simply not being straight with the public. From record NHS waiting lists and an unprecedented squeeze in living standards to crumbling infrastructure and an ever-escalating housing crisis, Britain will not escape its current mire without colossal levels of investment.
Instead, Labour bets the house on a magic fairy, otherwise known as securing the highest sustained economic growth in the G7. A worthy aim, but how would Labour achieve it? Since the advent of Thatcherism, Britain has been afflicted by weak growth that is inequitably distributed.
Departing from this age of stagnation requires a new economic model: none is forthcoming from Starmerism, whatever that is. Indeed, last year Starmer aptly described trickle-down economics as a “piss take”, but how is promising to raise living standards through economic growth without any meaningful redistribution any different? Consider the verdict of Jim O’Neill, an economist and former Tory Treasury minister who has advised Reeves. He has called for politicians to abandon “petty and arbitrary fiscal rules” and argues “it seems reasonably obvious that without much stronger investment, spending and productivity growth, the UK will not improve its growth performance”.
Whatever its multiple failures, the key successes of the New Labour period – like rebuilding public services and reducing poverty – were achieved by splashing significant sums of cash. Yes, the party stuck by Tory spending limits for the first two years, but genuinely impressive investment followed. No such commitment is forthcoming from today’s Labour party. Indeed, by ruling out a wealth tax and stating it will not increase the top rate of income tax or capital gains, a Labour government has precious little room for manoeuvre in office.
When he stood for leader, of course, Starmer promised to increase taxes on the rich: it represented a key plank of his abandoned “10 pledges”, as he promised not to “oversteer” in response to Labour’s 2019 rout. His claim that changed circumstances led to his many turnarounds is utter rot. The case for raising considerable revenue is far stronger now than it was in 2020. Claims that Tory economic mismanagement ties Labour’s hands are simply regurgitating George Osborne’s justification for austerity after the financial crash. Britain’s tax take is significantly lower than better-performing economies, and the rich are better off than ever. In any case, Britain’s tax burden is only set to increase – consider our ageing population, or a growing climate emergency. Should it fall on the backs of struggling Britons, or those with ample means?
Three years ago, a Wealth Tax Commission brought together scores of economists, legal experts and tax advisers to design a one-off wealth tax. They concluded that if the government introduced a 5% wealth tax on all individual wealth above £500,000 then it could raise a staggering £260bn. It incorporated important caveats: it would only be levied after mortgages and other debts were accounted for, and it would be payable in instalments over five years.
A bold Labour party committed to rebuilding a shattered society would adopt such a plan. Instead, Starmer relies on a shrinking crutch: a now scaled-back green transition plan funded by borrowing. His government risks being Blairism without the investment, or indeed a high-profile policy like the minimum wage. That would represent a bleak offer in good times: in a country enduring social agony, it’s a tragedy.
Owen Jones is a Guardian columnist
Abandoning a wealth tax is a ruinous Labour strategy. It’s ‘Blairism without the cash’
Owen Jones
Mon, 28 August 2023
Photograph: Christopher Furlong/Getty Images
When a British politician discusses “tough choices”, they invariably reveal whose side they are really on. A tough choice tends to involve emptying the pockets of those with little, or slashing a service ordinary citizens depend on. When Labour committed to retain the Tories’ two-child benefit cap – which drives hundreds of thousands of children into poverty – this was styled as a tough decision. Note, however, that raising taxes on the thriving rich is never described as such, even though such a commitment inevitably triggers coordinated hysteria from Tory politicians, rightwing media outlets and wealthy interests. Refusing to do so is the easy way out: it is the very opposite of a tough decision.
When Labour’s shadow chancellor, Rachel Reeves, rules out a wealth tax – or indeed other means of asking the well-to-do to contribute more – she underlines the political cowardice of the opposition. The party has been courting the support of big business in a so-called “smoked salmon and scrambled eggs” offensive, and is determined not to offend them. It’s not just any vestige of Corbynism that Labour’s masters wish to expunge: its leading thinkers believe that the party lost under Ed Miliband in 2015 because it was insufficiently deferential to corporate Britain. This is belied by the actual evidence: polling back then revealed that 42% of voters had considered the party to be too soft on big business, with just 22% believing it too tough. But Labour’s desire to genuflect before the powerful trumps all other considerations.
For anyone concerned about the state of the country after 13 years of ruinous Tory rule, this should cause alarm. Reeves rebuts the need for a wealth tax by announcing she doesn’t “have any spending plans that require us to raise £12bn worth of money”. Any politician who claims to be able to fix a country facing multiple overlapping crises without spending a lot of money is simply not being straight with the public. From record NHS waiting lists and an unprecedented squeeze in living standards to crumbling infrastructure and an ever-escalating housing crisis, Britain will not escape its current mire without colossal levels of investment.
Instead, Labour bets the house on a magic fairy, otherwise known as securing the highest sustained economic growth in the G7. A worthy aim, but how would Labour achieve it? Since the advent of Thatcherism, Britain has been afflicted by weak growth that is inequitably distributed.
Departing from this age of stagnation requires a new economic model: none is forthcoming from Starmerism, whatever that is. Indeed, last year Starmer aptly described trickle-down economics as a “piss take”, but how is promising to raise living standards through economic growth without any meaningful redistribution any different? Consider the verdict of Jim O’Neill, an economist and former Tory Treasury minister who has advised Reeves. He has called for politicians to abandon “petty and arbitrary fiscal rules” and argues “it seems reasonably obvious that without much stronger investment, spending and productivity growth, the UK will not improve its growth performance”.
Whatever its multiple failures, the key successes of the New Labour period – like rebuilding public services and reducing poverty – were achieved by splashing significant sums of cash. Yes, the party stuck by Tory spending limits for the first two years, but genuinely impressive investment followed. No such commitment is forthcoming from today’s Labour party. Indeed, by ruling out a wealth tax and stating it will not increase the top rate of income tax or capital gains, a Labour government has precious little room for manoeuvre in office.
When he stood for leader, of course, Starmer promised to increase taxes on the rich: it represented a key plank of his abandoned “10 pledges”, as he promised not to “oversteer” in response to Labour’s 2019 rout. His claim that changed circumstances led to his many turnarounds is utter rot. The case for raising considerable revenue is far stronger now than it was in 2020. Claims that Tory economic mismanagement ties Labour’s hands are simply regurgitating George Osborne’s justification for austerity after the financial crash. Britain’s tax take is significantly lower than better-performing economies, and the rich are better off than ever. In any case, Britain’s tax burden is only set to increase – consider our ageing population, or a growing climate emergency. Should it fall on the backs of struggling Britons, or those with ample means?
Three years ago, a Wealth Tax Commission brought together scores of economists, legal experts and tax advisers to design a one-off wealth tax. They concluded that if the government introduced a 5% wealth tax on all individual wealth above £500,000 then it could raise a staggering £260bn. It incorporated important caveats: it would only be levied after mortgages and other debts were accounted for, and it would be payable in instalments over five years.
A bold Labour party committed to rebuilding a shattered society would adopt such a plan. Instead, Starmer relies on a shrinking crutch: a now scaled-back green transition plan funded by borrowing. His government risks being Blairism without the investment, or indeed a high-profile policy like the minimum wage. That would represent a bleak offer in good times: in a country enduring social agony, it’s a tragedy.
Owen Jones is a Guardian columnist
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