21-07-2025
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.
