Rayner's stealth taxes would crush growth
The Deputy Prime Minister Angela Rayner has proved that there is one thing she has a real talent for: coming up with stealth taxes. As this paper reveals today, Ms Rayner wrote to the Chancellor in March with a list of ways to squeeze more revenue out of those with savings or investments. The Deputy Prime Minister's ruses would damage the economy as a whole.
Among the ideas Ms Rayner is pushing on the Chancellor are a freeze on thresholds for the 45 per cent income tax rate, measures to raise yet more in inheritance taxes, increasing the bank levy, and yet another clampdown on stamp duty that will, in effect, amount to another increase.
Chancellor Rachel Reeves may be boxed in by her promise not to raise any of the main taxes, but with the economy stagnating, and with the wealthy exiting the country in escalating numbers, she will have to raise money from somewhere.
There are two problems with Ms Rayner's little list. The point of Labour's pledge not to raise the main rates of tax was not to impose dozens of stealth levies instead. It was a promise to deliver faster growth and higher spending without taking more money out of people's pockets.
Next, and more importantly, the stealth taxes Ms Rayner proposes will do maximum damage to the productive base of the economy. For example, if the government scraps the inheritance tax exemption for companies listed on the Aim market it may raise a little extra cash. But Aim was designed to help growing businesses raise money for investment; the exemption encouraged investors to take a chance on backing smaller businesses. If we starve them of cash, they won't be able to invest or grow.
Freezing the thresholds for the 45 per cent rate of income tax will over time capture more and more middle earners in a bracket that was originally designed for the genuinely wealthy. It will take us back to the punitive rates of the 1970s, deter people from working, and drive wealth overseas.
Each and every raid the Deputy Prime Minister proposes damages entrepreneurs, savers, or strivers. Ms Rayner will find a ready audience on the backbenchers and among Labour Party members for her old-fashioned tax-and-spend agenda. The Chancellor hasn't given in to her yet.
Unless the Government can find a way of controlling spending, or boosting growth, then it will inevitably try to find new sources of revenue. Ms Rayner's nightmare list may be a terrible warning of what lies ahead.
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