Four times Rachel Reeves got her maths wrong

Telegraph

07-05-2025

Labour is under pressure to row back on its winter fuel raid after its dismal local election results.
Wes Streeting, the Health Secretary, has admitted that 'people aren't happy' about the decision to strip 10 million retirees of their energy bill allowance, recognising it had been a topic on doorsteps during election campaigning.
The raid, which restricted eligibility for the winter fuel payment, was introduced last July to 'ensure economic stability and repair the public finances'.
On Tuesday, Mr Streeting told the BBC the policy was not being formally reviewed, but said the Government was 'reflecting on what the voters told us' after Labour lost two-thirds of the council seats it was defending.
Amid speculation over whether the party could row back on its raid on pensioners, The Telegraph outlines the four Labour policies that are on track to backfire.
Non-dom reforms
Labour's 'non-dom' reforms could cost taxpayers billions of pounds, according to a new report.
In her October Budget, Rachel Reeves abolished the non-dom regime which allowed wealthy foreigners to avoid paying tax on overseas income.
The tax raid is expected to bring in £33bn for the Treasury, according to the Office for Budget Responsibility. However, this figure depends on high-income non-doms staying in the country and paying tax here.
The Centre for Economics and Business Research (CEBR) estimated that if 40pc of non-doms left the country in response to the policies, the Treasury would miss out on £7.1bn over the course of the Parliament. If half of non-doms left, the losses would mount to £12.2bn.
The average non-dom pays £85,000 in income tax, according to the CEBR. The average UK employee pays £4,000. In its predictions, the OBR estimated that only 12pc of non-doms will leave the country in reaction to the legislative changes.
However, a survey by Oxford Economics found nearly two thirds of non-doms were considering fleeing the UK. The decision to abolish the regime has already triggered a wealth exodus, according to tax advisers.
Lizzie Murray, of accountancy firm Saffery, said some of her clients were planning to leave the UK or had already done so because of the reforms.
'Families left last summer partly because of the non-dom changes, but also because of the VAT on school fees from January. I also had other internationally mobile clients who left the UK before April 5 so they were non resident as of the current financial year.'
She continued: 'My overall feeling is that where clients can leave the UK, either in the short term or next few years, they are planning to do so.'
The Treasury has said it 'does not recognise' the figures in the CEBR report.
Private schools
Private schools have been forced to pay 20pc VAT in order to raise £1.7bn a year for state schools.
But, Labour's own impact assessment published on the day of the October Budget suggests 35,000 private school pupils could be pushed into state schools by the policy, piling pressure on local authorities.
Ms Reeves was reportedly warned by her own civil servants it would harm poorer families.
The Independent Schools Council (ISC), which represents around 1,300 private schools, has said that private school enrolments fell by 10,000 pupils in September 2024.
The ISC has calculated that educating these 10,000 additional pupils in the state system would cost the Department for Education £92.8m.
Financial advisers last year separately warned that schools were preparing to use a loophole to claim back hundreds of thousands of pounds from the Treasury to 'soften' the blow of higher costs.
Advisers said that schools were delaying new capital projects in order to benefit from full tax relief. New projects completed after January 1 could be eligible for up to a 20pc tax rebate under the Capital Goods Scheme (CGS), while those completed as long as 10 years ago may qualify for partial relief, representing potentially a sizable windfall for some schools.
Tax relief allows schools to claim back VAT for new developments such as libraries and sports facilities. The money could then be used to pay some or all of the VAT bills on fees that schools are facing.
The High Court is currently reviewing whether the VAT raid is in breach of the human rights of children.
Winter fuel allowance
The Government is under pressure to revisit the winter fuel allowance cut following Reform's success in the local elections.
The Chancellor announced in July 2024 that retirees would no longer be entitled to the winter fuel payment unless they also receive pension credit. She claimed the policy would raise £1.3bn in the first year and £1.5bn annually after that.
However, the cuts triggered a surge in applications for pension credit, which could dent the cash savings from the policy.
The Department for Work and Pensions received 235,000 pension credit claims in the seven months following the announcement – an 81pc increase on the same period in 2023-24. Of these, 117,800 were awarded, up 64pc year-on-year.
Steven Cameron, of pension firm Aegon, said: 'Last year's loss of the winter fuel allowance has clearly not been forgotten or forgiven and the Government may need to do more to prove its credentials in supporting pensioners as well as workers.'
Capital gains tax
In her October Budget, the Chancellor aligned capital gains tax rates for shareholders with those of property investors. As a result, the basic and higher rate rose from 10pc and 20pc respectively to 18pc and 24pc.
However, analysis suggests the tax raid has backfired, with investors selling up before the new rates came into effect.
Data from HM Revenue and Customs shows that revenue from capital gains tax has fallen from £14.5bn to £13bn year-on-year.
The Office for Budget Responsibility recently revised its forecast for capital gains tax revenue, wiping £23bn off the projected tax take by 2030.
Higher capital gains tax rates can deter investors from selling up while others may choose not to buy assets in the first place.