The clever wheeze of raising income tax and cutting National Insurance wasn’t going to work. The exit tax fell apart as the entrepreneurs started packing their bags for Monaco and Dubai.
And after last year’s catastrophic rise in employment taxes, the Chancellor Rachel Reeves isn’t going to try and take more money from business again.
Still, never mind. Even as her plans fall apart, she has come up with a fresh idea. A mansion tax that will fall most heavily on modest homes in Buckinghamshire, Cheshire or Surrey. In reality, Labour’s assault on the middle class has reached terrifying levels – and it is only going to get worse over the next few years.
The Chancellor may of course change her mind several times before the weekend is over. Even so, according to the latest briefings, Rachel Reeves is now planning to balance the books with an extra levy on properties that fall into the top three council tax bands. It will be sold as a “mansion tax” to cheer up the class warriors on Labour’s backbenchers, but it will mostly be paid on very ordinary houses.
And while it will still officially be called “council tax”, in reality the money won’t be used to fix the potholes, or improve the bin collections. It will flow back to the Treasury, either directly, or through lower grants to local authorities. It will just be an extra levy on people the Government deems “rich”.
There are, however, two big problems with that. To start with, it is grossly unfair. Sure, a few of the people forced to pay the new surcharge will have plenty of money. And yet, in 26 local authorities a quarter of all homes will have to pay higher bills.
If they are retired, or single parents, or just struggling to keep up with the cost of living, they will still have to find the extra money. Unlike income tax or capital gains tax it will be levied regardless of how much money you have.
Next, and more seriously, it is part of a clear pattern. It will be yet another tax rise for the middle class. It is hard to distinguish any clear ideological thread in the Starmer administration. But if there is one it is this. It is driven by a class war, and a determined assault on anyone it deems as comfortably off.
We saw that in the decision to impose VAT on school fees, even though hardly any other countries in the world impose sales taxes on education. We saw it with the decision to impose inheritance taxes on farmers and family owned businesses. We have seen it with frozen tax thresholds, which means that 18 per cent of the employed workforce has been dragged into the 40 per cent tax bracket. We have seen it with the cavalier disregard for the 60 per cent “tax trap” that applies on incomes between £100,000 and £125,000, with 700,000 people now paying that marginal rate, double the number six years ago.
The list goes on and on. It is likely that it will get far worse when the Budget is finalised. We will see a “mansion tax”; another raid on pension schemes, a raid on lawyers and accountants by a change in the way partnerships are taxed; higher taxes for landlords; stiffer capital gains taxes; and fresh levies on dividends, even though they are typically the only way entrepreneurs can pay themselves.
The planned rise in the basic rate of income tax would at least have corrected that. It would have meant that Labour’s insatiable appetite for higher state spending had to be paid for by everyone. Instead, it has now retreated into its comfort zone, and will keep on taxing the modestly affluent instead – at least until the money finally runs out.
