Same old Labour, always taxing?

After months of waiting, the answer was clear.

People had long wondered what direction this Labour government would take. ‘What is Keir Starmer’s plan?’, had been the repeated refrain from the Conservatives. Labour’s ‘Ming vase’ strategy, in which they appeared to reveal as little about their plans as they possibly could, was evidently designed to win them office. What it didn’t do was tell people what they were actually signing up for when they were voting.

Well, now we do know. £40 billion of tax rises (for comparison, that is almost as much as Jeremy Corbyn promised in 2017). The highest tax burden since 1945. High levels of borrowing. Same old Labour? It certainly felt like it.

As ever, it is worth stating that CARE is strictly politically neutral; we do not favour any given party or candidate (even those who claim the name of Christian) but work in support of good government, wherever it is found, in pursuit of our vision to see ‘Politics Renewed, Lives Transformed’. The point of this blog is certainly not to be a hit-job on Labour, and we were plenty-critical enough of the Conservatives when they were office at times too.

But there has been one comment I have seen over and over again from the media in the last couple of days; it was the case even from the more neutral observers.

Chris Mason, BBC: “I lost track during the election campaign of how often Labour folk insisted they had “no plans” to put up taxes beyond a relatively narrow band of those they said would rise. Looked at now you don’t have to be wildly uncharitable to conclude that was comprehensive baloney.”

Jon Sopel, The News Agents podcast: “[This is] probably the biggest tax rise in decades. Wouldn’t it have been better just to be a bit more honest with the British people before the election that taxes were going to go up like this?”

Beth Rigby, Sky News: “You might be forgiven for feeling rather blindsided. Because the tax and spending plans outlined today by Chancellor Rachel Reeves in the first Labour budget are as hefty and historic as the Labour manifesto was vague. In that document there are just a handful of pages of costings, and a commitment to £8bn of tax rises to fund spending commitments for more NHS appointments and more teachers. There was nothing in those plans that signalled the £40bn of tax rises by the end of this parliament or the £76bn in increased spending.”

In the early interviews reacting to the budget, the same question was put to both Keir Starmer and Rachel Reeves: ‘did you essentially mislead the British public?’

And that question does matter.

You might be a fan of higher taxation, to fund the NHS or to decrease inequality. You might not be a fan, wanting to keep more of your hard-earned money.

But regardless of whether or not it works - and there are major questions being asked about the strategy already, which seems to be all pain for very little gain - you have to question one thing: where is the mandate for this?

Because it certainly wasn’t what Labour had promised in its manifesto.

Labour has often been met with suspicion on the economy, and its reputation for fiscal prudence lay (somewhat unfairly!) in tatters after the world financial crash during Gordon Brown’s premiership. You might remember the note left by former chief secretary to the Treasury, Liam Byrne: “I’m afraid there is no money.”

Aware of its perception as a party that brings in higher tax in order to spend more, the now-Chancellor Rachel Reeves explicitly ruled out increases to the big three taxes: income tax, VAT, and to National Insurance (more on that one later…) prior to the election.

There were small, limited rises promised, such as the introduction of VAT on private schools. But she also said that she had “no plans” to raise much in the way of tax besides that, such as through inheritance tax or capital gains tax. Instead, public services were to be funded by economic growth; Labour was now to be the party of business.

This budget backtracks on all of the above. Perhaps we should have seen it coming. Former Prime Minister Rishi Sunak, resembling the prophetess Cassandra from Troy, doomed to speak the truth but never be believed, repeatedly spoke at election time about £2000 tax rises on working families. (Of course, he also warned about the impact of Liz Truss’ economic plan during the Tory leadership contest, making it two from two…election losses, that is).

The Chancellor’s claim that there was a £22 billion hole in the finances for this year - a figure which the OBR has distanced itself from - has prepared the ground for her to unleash the largest rise in taxes of any budget since the days of John Major and Norman Lamont.

• National Insurance raised on businesses. This is the big one, forecast by Labour to raise £25 billion (although the claim has already been challenged, with it being suggested it will be more like £15 billion that is actually brought in)

• Increases in both the lower and higher rates of Capital Gains Tax

• Unspent pensions now falling under the threshold of Inheritance Tax

• Family farms worth over £1 million now coming under the scope of Inheritance Tax, where they were previously exempt

• Stamp Duty on second homes rising from 3% to 5%, which is likely to drive renting costs up

• The first-time-buyers allowance on Stamp Duty being dropped from £450,000 back down again to £325,000

• And plenty more.

Call me cynical, but maybe this really is just the reality of politics; politicians promise, and with more spin than a googly, they either claim they’re not at fault, or that they never said it to begin with, or that they’re not actually breaking their promise now, when it’s clear to everyone that that’s exactly what they’re doing.

A case in point this time is the rise in National Insurance. The Chancellor said that Labour was committed to not raising taxes on ‘working people’ (causing quite the furore on what exactly a ‘working person’ was, as they didn’t seem to want to define it). Now by the letter of the law, the rise this time falls on businesses. But in reality, it’s working people who are predicted to essentially pay the cost of 60% of the money raised, as many businesses won’t award them the pay rises that they would otherwise have done.

It’s a truism that elections are normally won from the centre-ground. And after their own disastrous defeat in 2019, Keir Starmer’s strategy had been to sound as uncontroversial as possible, in order to get elected. The problem is, when a Government starts abandoning election pledges so early on, you can’t help but wonder what else they weren’t being entirely straight on.

But this is far from being just a Labour problem; if we had a pound for every broken promise in recent years, perhaps we’d be on our way to fixing that £22 billion black hole…

Promises (and manifestos) do matter. They are how the public knows how to choose who to back at election time; how the voters are able to decide what vision for Britain they believe in.

And as Christians, this should matter to us. We believe in a God who keeps his promises to us: “For no matter how many promises God has made, they are “Yes” in Christ” (2 Corinthians 1:20). We believe in a God whose every word is truth, for when he came to this world, he declared, “I am the way and the truth and the life” (John 14:6). And Jesus himself told us to speak plainly, and to mean what we say: “Let your yes be yes” (Matthew 5:37).

Parties are held to account at the ballot box for whether they keep their promises. The Lib Dems have never recovered from time in coalition (with the u-turn on tuition fees something they have never really lived down among young people). The Tories have been booted out of office, and have watched the rise in the Reform Party, quite understandably, as a result of not delivering on their promises: four consecutive manifestos promised cuts to immigration, and they delivered the exact opposite.

Time will tell whether this Labour government will be similarly held to account. But promises should matter.

So the big question we’re left with is this: will it be worth it? What are we actually getting for £40 billion of tax rises (and a further £30 billion of borrowing).

Well let’s start by looking to affirm what’s good. Labour’s stated aim is to protect ‘working people’. It doesn’t take very much analysis to work out what they primarily mean by this: there is a particular desire to protect some of the poorest in society (regardless of whether or not this will work). Measures like scrapping the non-dom tax status, or raising stamp duty on second homes are - in theory - supposed to redistribute wealth from the ‘haves’ to the ‘have-nots’ (at the same time, the minimum wage is due to rise again to £12.21/hour).

The impulse here is a good one. God has a particular concern for the poor. Jesus said that he has come to “proclaim good news to the poor”, in his first public sermon which laid out his agenda to bring the kingdom of God. Various characters are commended for their help of the poor, from Job (Job 29:16), to Shallum, the king of Judah (Jeremiah 22:16) and Tabitha (Acts 9:36). God instructs the nation of Israel to adopt various measures for the benefit of those in poverty, such as the seven-year cancellation of loans (Deuteronomy 15) or the year of Jubilee (Leviticus 25).

And there are some measures in the budget which are genuinely encouraging to see. It was heartening to read about the raise in the earnings limit placed on people who can claim government support for caring for the disabled, sick or elderly; this has now risen from £151 to £196. There are also some tax rises I don’t mind at all; the rise in taxes on vaping and smoking, for instance, industries which make money out of fostering addictions.

But there are also points at which the budget arguably comes across as ‘politics of envy’ (adding VAT onto private schools makes the UK one of only two countries in the world to have a tax on schooling), and some of the measures which are designed to initiate redistribution of wealth are just practically unlikely to work. Abolishing the non-dom status sounds very sensible (and only fair!) on paper. In reality, rumours abounded in the final weeks before the budget that Reeves was considering scrapping the measure, as it would cost the Treasury more than it would bring in (with the wealthiest just choosing to leave the UK altogether).

Sadly, fairness and prosperity don’t always mean the same thing, however much we might want them to!

And perhaps the most damaging observation is around what we’re actually getting for all this. For how are we defining who those ‘most in need’ are? Clearly it’s not pensioners, who due to tax freezes on income tax rates, will be paying tax on the state pension within this Parliament. And it’s not the third or fourth child in a family in poverty: the two-child cap for benefits is still in place. Investment is primarily going into defence and into the NHS…again.

The Health Secretary Wes Streeting had promised (yes, there’s that word again) that there would be no additional funding for the NHS without reform, after successive Conservative governments pledged ever increasing sums of money to it for no particular gains. Forget black holes: the NHS has proved to be more of a black pit, in economic terms. What do we have here? A £22.6 billion increase in money for the NHS. And so far: no reform.

That’s before we even get onto the pay-rises for the unions: if you’re in the public sector, enjoy it while you can. If you’re in the private sector, bad luck!

Same old Labour? It does rather feel like it.

The cards are now on the table, whether you agree with them or not. Because in a sense, that doesn’t actually matter for the next five years. As a Christian, our response ought to be the same: to pray that it does actually work, for our nation to prosper.

“Seek the peace and prosperity of the city to which I have carried you into exile. Pray to the Lord for it, because if it prospers, you too will prosper.” (Jeremiah 29:7).

I’ll be continuing to pray for our Government, and for our nation. May this Budget pay off, as our leaders intend it to.