Labour’s cynical plan to increase taxation
Following on from Sir Keir Starmer’s assertion that he had been handed the “worst inheritance since the Second World War”, the Chancellor Rachel Reeves is set to unveil a £19 billion “black hole” in the public finances as the Government continues to prepare the ground for a tax raid in an autumn budget.
Sir Keir and Ms Reeves presumably intend to claim that they have discovered unexpected horrors lurking within the books that will, regrettably, require higher taxes to fix. Yet as Ms Reeves herself noted only last month, you don’t need to win an election to see the state of the public finances: everyone knows what the Government is spending, and what it is bringing in.
While it is true that there are pressures on public services, the so-called “excess pressures” underlying the new figure will be in significant part the result of choices made by Ms Reeves and her colleagues, not least apparent plans to award above-inflation pay rises to public sector workers.
The Chancellor may argue that it is necessary to accede to demands for higher pay for public sector workers, seeking to hide behind the views of independent pay bodies. She should not be allowed to abdicate responsibility in this way.
When push comes to shove, it is the Government’s choice whether to follow these recommendations. To believe otherwise is to accept the transfer of political decision-making from democratically accountable politicians to the quangocracy.
No matter the lengths to which the Government goes to deny it, the simple fact is that Labour’s tax rises would be the result of Labour’s policies. The choice to pour money into unreformed public services before improving productivity is just that: a choice.
As the population ages, this point will only grow in importance. If our political class falls into unquestioning acceptance of the idea that an older country inevitably means a larger state, it will effectively diminish the role of politicians to that of determining how to fund the latest spending demands from the NHS. To this end, it is to be hoped that the Health Secretary Wes Streeting succeeds in his attempt to link funding increases for the health service to meaningful reforms and higher productivity.
For now, it is possible that an improving economy will ease the pressure on the public finances, possibly resulting in smaller tax increases than some fear. But should this come to pass, a sigh of relief would be entirely the wrong response.
If the Government is unable or unwilling to cut taxes when the economy is returning to growth, what prospect is there for lowering the tax burden in the future?