As we move towards 2024 and closer to a general election, people are wondering what tax policies to expect from the main political parties.
We will get more detail once we have the manifestos to consider – some time later into 2024 in all probability. We may also, of course, get some hints at the upcoming party conferences.
With the Conservatives, we have both the Autumn Statement and the 2024 Spring Budget to give further indications of its direction of travel in relation to taxation.
But the big question is what the Labour party could have in store, especially given the current standing in various opinion polls.
Reeves was categorical she was not adopting the politician’s trick of non-denial
People still remember the somewhat radical policies proposed by former Labour leader Jeremy Corbyn and shadow chancellor John McDonnell with more than little fear. Current leader Kier Starmer and shadow chancellor Rachel Reeves have been at pains to stress they are very different, though.
So, what do we know?
Until recently, Reeves has only mentioned a small number of targeted tax increases, none of which are significant revenue raisers. These are:
- Ending (or reducing) the tax benefits of the non-domicile rules
- Treating carried interest as earned income rather than capital gain
- Removing the charitable status for private schools
- Reinstating the lifetime allowance rules
In a recent interview with the Financial Times, Reeves said she had “no plans” to align capital gains tax (CGT) rates with income tax rates or to restrict relief for high earners’ pension contributions. This appeared to contradict her earlier statements about increasing taxes on wealth .
Labour is vulnerable to Conservative accusations it is a tax-and-spend party
Last weekend saw another interview with Reeves, this time in the Telegraph. This was, to a large degree, a replay of the “don’t-frighten-the-electorate” FT interview. I summarise the key points here:
- A previous plan from Starmer to raise the top rate of tax is “off the table”.
- So too is “any form of wealth tax”, despite the recent re-emergence of proposals on this front.
- The party does not have “any plans to increase taxes outside of what we’ve said”.
Reeves was categorical she was not adopting the politician’s trick of non-denial – saying there are no current plans, thereby leaving scope for future changes of plan. In her words: “We won’t be doing that. It’s not a non-denial, it’s just a denial.”
While Reeves’ interview gained plenty of attention from the media, it did not alter the picture of Labour tax policy painted by the previous Financial Times interview.
Labour is vulnerable to Conservative accusations it is a tax-and-spend party. The row over the expansion of the Ulez charging zone, which arguably cost Labour a by-election victory in Uxbridge, is a variation on this theme.
The shadow chancellor’s latest statement will be well received by those who could be affected by a wealth tax
Reeves and Starmer are therefore doing all they can to soothe these concerns. Some pundits have labelled their approach as the Ming Vase strategy: tip-toing forward to avoid dropping an extremely precious item (an election win). The spectre of Neil Kinnock’s 1992 election defeat still looms large in the party’s memory.
Reeves’ comments ruffled some feathers on the left wing of the Labour party, some parts of which favour a wealth tax. It will be interesting to see how much their complaints are supressed when Labour holds what is almost certainly its pre-election conference in Liverpool on 8 October.
On the whole, though, financial planners and clients should be cautiously reassured by what they have heard so far. CGT stability will be particularly welcome – especially given the concern that resulted from the Office of Tax Simplification proposal to tax capital gains in the same way as income.
Since the Wealth Tax Commission report in 2020, there had been little talk of a wealth tax – despite the recently introduced solidarity tax in Spain. But there has been a recent flurry from three groups – Tax Justice UK, the Economic Change Unit and the New Economics Foundation – to resurrect the idea of it. The shadow chancellor’s latest statement will be well received by those who could be affected.
There’s no doubt that questions on tax and what, if any, action to take, will increase as we head towards the election.
Tony Wickenden is managing director of Technical Connection
Interesting and thoughtful – as always from TW – in reality… I doubt there is much left to tax/increase in tax (rates) liability, this Govt. has done a fine job!
Wealth taxes come in many different guises –
1. Arguably, the pension fund value limit at 55% (if returned to) is a wealth tax;
2. Ignoring risk, especially in SMEs, the dividend discount has been removed through the dividend raids recently;
3. The ‘creep’ of IHT is a quickly gathering weight snowball;
4. We must hope of no return to the crazy Lib Dem idea of a wealth tax upon residential property values. Their last iteration was so ill thought, sic, through it was almost comical –
– With no allowances, any property worth £2M would have suffered a 1% tax – this despite the fact it may have become so just because the owners lived in a London postal and chose not to move for 30 years.. or, Huge remedial works were carried out, this especally so for listed private dwellings for the benefit of the nation.
The two elephants in tax room are –
1. A fundamental review of the VAT system, with, as a principle, less on cheaper goods, and more on more expensive items – particularly services in the latter case, E.g. Large legal bills charged in the City;
2. An overall quantum limit upon how much any individual pays in income tax in any tax year – GB needs to fill up with the wealthy as well as those seemingly happy to pay over priced cross channel fares.
I seem to remember a few years ago someone talking about “fixing the roof whilst the sun is shining”… the benefits of QE, like the Royalties, CT, and PRT revenues from BSCSNS – 1960s to date, have been largely wasted – now it is time to repay all the paper, and vacuum back up all the cash, it looks like we are left with a comic outcome – ‘Tears for souveniers’.