Latest news with #tax policy
Telegraph
21-07-2025
- Business
- Telegraph
Reeves is about to be punished for doing the right thing
It is often pointed out that our main political parties are coalitions, made up of people with overlapping, rather than common, aims. This is certainly true of Labour, whose divisions over basic principle, as well as policy, have been painfully exposed in the last year. While a majority of its MPs seem willing to follow Starmer's lead on issues like welfare reform and the cutting of pensioners' winter heating allowances, a significant minority of them – supported by a worryingly large number of ordinary party members and trade unionists – would prefer to forge an altogether different set of policies and even a different type of government. On the crucial area of whether a 'soak the rich' tax policy needs to be adopted, Labour is split into two very different, opposing, camps. This issue is one that will define the government between now and the next general election. Whatever promises Labour made in its general election manifesto last year not to raise taxes for working people, now that it enjoys an overwhelming majority in the Commons, Left-wing back benchers are becoming impatient. Why can't the government just do what the party wants? And the party, as represented by former party leader, Lord Kinnock, as well as a swathe of back benchers and union leaders, wants a wealth tax. Regular claims by the Left that the rich 'don't pay their fair share' of tax are easily countered by the observation that the top one per cent of income tax payers already provide 30 per cent of all income tax revenue. A wealth tax – here envisioned as a two per cent levy on assets worth over £10 million – could hardly be seen as a tax on 'working people' because, according to Left-wing lore, wealthy people do not work but spend their days shooting grouse on their country estates and laughing at children who are forced to climb up chimneys. That a number of countries have already attempted such a tax and been forced to repeal it after it proved effective only in driving individuals out of the country is an inconvenient fact that can be ignored. And such arguments are indeed dismissed by people who give the impression that the purpose of such a tax increase would be less about raising money to spend on social programmes than about punishing rich people for the crime of being rich. That has always been a temptation of the Left and it took the election of Tony Blair as leader in 1994 to persuade them – or start to persuade them – that tax rises are not a good thing in themselves, and that they should only be used to fund a particular project rather than about signalling a particular principle or virtue. The Chancellor Rachel Reeves has learned that lesson and is robustly holding out against her comrades' urgings to take a more Left-wing approach to the 'problem' of the presence of wealthy people in our country. She recognises that as well as failing to raise the promised revenue, a wealth tax would be seen internationally as a sign that Britain has turned its back on wealth creation, a place where wealth creators – who tend to be wealthy themselves – are not welcome, which is precisely the opposite strategy that Reeves and the government wish to pursue. But back benchers have tasted blood. They got their own way by forcing a humiliating climb-down by Keir Starmer over welfare reform – the idea that the welfare budget should not be expanded while Labour is in office is anathema to the government back benches – and now they see an opportunity to get their way again by forcing an unwanted and unworkable policy on the Chancellor. No doubt this would be seen as a weapon that could be used against the threat of an emerging Jeremy Corbyn-led party that threatens to tempt Left-wing voters away from Labour. Reeves can see that this is all self-defeating nonsense. The one thing that could spell the demise of this administration would be if it proved an incompetent steward of the public purse and the economy. Attractive though populist quick fixes of the kind that can be summarised in a shouted slogan during student protest marches through central London might be (one of those slogans that is inevitably followed by the demand 'NOW!'), the Chancellor knows that real life demands real world solutions. Reeves must stand firm against the childish demands of back benchers who are too reluctant to accept that the roles of party activist and parliamentarian have very different, and often conflicting, responsibilities.
Yahoo
19-07-2025
- Business
- Yahoo
Tax rises: Freeze on income tax thresholds for millions left on table by Treasury minister Darren Jones
Treasury minister Darren Jones left open the prospect of freezing the thresholds for paying income tax beyond 2028 as the Government scrambles to balance the public finances. He stressed that the policy as of 'today' was not to extend the freeze as pledged by Chancellor Rachel Reeves in the Budget last year. He repeatedly emphasised that Labour's election manifesto promised not to raise the 'headline rates' of income tax, VAT and National Insurance on working people, leaving open the option of further freezing thresholds rather than increasing them in line with inflation. In 2021, then Chancellor, Rishi Sunak announced the income tax personal allowance and higher rate threshold would be frozen from April 2022 until April 2026. The following year, Jeremy Hunt who was now Chancellor announced the freeze would be extended for a further two years until 2028. In the Budget last October, Ms Reeves said the freeze would be lifted from 2028-29. 'Extending the threshold freeze would hurt working people,' she said. But her deputy Mr Jones, Chief Secretary to the Treasury, declined to repeat her promise. 'That is Government policy today,' he told LBC Radio. 'But what I'm not going to do is speculate one way or the other about any form of tax policy.' Earlier, he told Times Radio: 'What our manifesto said is we are going to protect working people by not increasing the headline rates of income tax, VAT or National Insurance.' People start paying the basic rate of income tax once they earn over £12,570 and the higher rate once their income goes above £50,270. London's median full-time salary is £41,866 so many senior health workers, police officers, teachers, and private sector employees are being hit by 'fiscal drag' of the income tax threshold freeze, pulling them into paying the higher rate. Extending the freeze would raise over £38 billion a year in 2029/30, according to the Office for Budget Responsibility. The fiscal watchdog has warned that the UK's state finances are on an 'unsustainable' path due to a raft of public spending promises the Government 'cannot afford' in the longer term. Recently, the revolt by Labour MPs over welfare reforms blew a £5 billion hole in the public finances, on top of the £1 billion cost of the U-turn on winter fuel payment cuts. Ms Reeves has declined to rule out looming tax rises. But Mr Jones said he did not recognise a report that there was now a £20 billion black hole in the public finances. The Government claims it has made economic growth its No1 priority. But Bank of England governor Andrew Bailey says companies had cut jobs and restricted pay rises as they 'adjust' to having to pay the higher National Insurance contributions on employers announced by Ms Reeves. In an interview with The Times, Mr Bailey said he believes the interest rate set by the Bank of England, currently 4.25%, would be lowered in future, after it was held in June.
