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October 26 2024 - 8:00am
Perhaps the most remarkable thing is how long Labour’s “no tax rises on working people” line actually held. A masterstroke in strategic ambiguity, it allowed nearly all voters to hear “I won’t be taxed more than I already am” during the election, while offering Keir Starmer and Rachel Reeves plenty of breathing room to claim a mandate for specific tax hikes. That is, once they were safely ensconced beyond the thresholds of Number 10 and 11 Downing Street.
Could we not understand even senior royals as “working people”, in a week where King Charles carried out official engagements, made speeches and engaged with world leaders as Britain’s most senior diplomat at the Commonwealth Heads of Government meeting in Samoa? Semantically yes: even the King works — though of course, the very idea of the head of the monarchy being a “working person” is derisory.
But the soundbite was always going to crystallise into a functional definition sooner or later. We are now watching ministers and journalists contorting awkwardly in a merry dance where everyone knows what the definition is actually shaping up to be: people who primarily derive their income through work, rather than through returns on assets. Meanwhile government MPs desperately try to avoid calling Britain’s millions of private landlords non-working people, despite their wealth.
Starmer attempted to clarify the line with only marginally less ambiguity this week, suggesting a working person is someone who “goes out and earns their living, usually paid in a sort of monthly check” and who can’t “write a check to get out of difficulties”. Either way, we will find out for sure who counts next Wednesday, when Reeves presents her first budget.
Conspicuous by the unsubtle and looming presence of repeated non-denial-denials, it appears certain that the budget will include an increase in employers’ national insurance contributions. A tax on businesses, not working people. Except, there are thousands of small businesses run by people that are hardly hard-nosed, sharp-suited prospective investors for Dragons’ Den. Publicans, shopkeepers, hairdressers and local cafe owners are among them — as shadow deputy PM Oliver Dowden highlighted across the despatch box to Angela Rayner in this week’s Prime Minister’s Questions.
Inevitably, an increase in business costs from raising employer’s NI will result in smaller and deferred pay rises, and less hiring. It could quite reasonably be argued that this is in effect, an indirect method of raising tax revenue from working people — and that all Reeves and Starmer have achieved in their ambiguity is complexity.
Between them, income tax, national insurance and VAT account for the vast majority of tax receipts. Ruling out each of them — while actually raising income tax by stealth through keeping income thresholds fixed — was always going to lead to semantic arguments with and fights with numerous minority interest groups, like slowly pulling off many small plasters, rather than ripping off one big plaster in one go.
But it’s no use protesting to Reeves and Starmer. They’re just the doctors delivering the bad news to the ill patient. It wasn’t either of them — or indeed the public — that spent the last 14 years implementing a high-tax, low-growth system of governance.
This is all in the context of ruinous public finances and a large cohort of Baby Boomers retiring into health and social care needs. The only way out of it is economic growth, but that feels like a distant dream. Let us all hope that Labour has the intellectual and operational heft to deliver on it.
