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  5. Inside Labor's plans for a populist tax raid – and ..


Inside Labor's plans for a populist tax raid – and debt-driven spending surges

Led by Keir Starmer and Rachel Reeves, the Labor Party seeks to highlight its economic reputation. Credit: Leon Neal/Getty Images Europe

Rachel Reeves, fresh out of the business class fight and armed with the prospect of attracting American entrepreneurs and politicians, is tasked with bolstering Labor's economic credibility.

Her tour of New York and Washington, D.C. culminated on Wednesday. in a speech at the Peterson Institute think tank in which she flirted with Joe Biden with her “securonomics” plan to mimic his administration at high cost.

Ms. Reeves declared globalization “dead” and denounced British politicians “. too willing to believe that wealth will seep down,” as she argued for a stronger, interventionist state.

But among her statements about the direction of the world economy and her vision of “an active state in partnership with a dynamic market”, there was very little about the issue that dominates conversations in Britain's pubs and drawing rooms: taxes.

The tax burden. Populist tax raids

The 11,000-word pamphlet published at the same time as the speech contained only two paragraphs on taxes and little detail about Labour's proposals other than a statement that they would be “fair and efficient”.Ms Reeves and her Labor Party colleagues are postponing most fiscal policy questions until the publication of the next manifesto, and the party has limited its tax policy statements to those aimed at the ghosts of the British economy.

Private investment firms, independents schools, landlords, non-government organizations, tech giants and fossil fuel companies are expecting tax increases, and a crackdown on offshore trusts is expected in the coming months.

Politics seem to be more focused on presenting Labor as a party of justice than on increasing revenue.

Treasury officials have privately raised concerns that both non-domestic and private wealth taxes will actually cost the Treasury due to the export of rich people abroad.

Meanwhile, Ms. Reeves remained silent on her point of view, as outlined in the 2018 policy paper. that Labor should introduce property and land taxes, introduce a new levy on all gifts instead of an inheritance tax, and increase capital gains tax.

A Labor spokesperson said Ms Reeves “made it clear that all the policy on the manifest will be fully paid for and fully funded.”

1405 Exodus of the Unrecognised Borrowing for Net Zero

However, Ms. the party is struggling to finance the massive spending increases planned for its first term. .

Her 'Climate Investment Pledge' at the 2021 Labor Party Conference commits her to spending £28bn annually on environmental initiatives to promote clean energy and reduce carbon emissions.

An aide told on the sidelines of the conference that the money will borrowed rather than taken from existing departmental budgets, which is 20% more than the amount borrowed for 2022/2023

The party already has looser fiscal rules. rather than the government committing to reduce borrowing as a percentage of GDP, but without the hard cap of 3% that limits Chancellor Jeremy Hunt.

But Ms. Reeves' team plans to further justify their borrowing by measuring debt from the point in terms of “public value” – a measure that takes into account the change in the value of state assets in terms of borrowing.

In a 2019 report for the left-wing think tank Resolution Foundation, economist Richard Hughes argued that a “net asset value target” would “allow the government to take advantage of historically low interest rates” – now wiped out by inflation – to boost public investment.

< img src="/wp-content/uploads/2023/05/077e4a1c7a694baa1ebb39820f2ffb02.jpg" />Shadow Chancellor Rachel Reeves' plans to mimic US President Joe Biden's spending spree. Photo: REUTERS/Jonathan Ernst. consider that loans for capital investments are not taken into account.

“For those of us who have been on this agenda long enough, there is more to this than a nod to Gordon Brown's golden rule of trying to define what is current spending and what is capital spending,” he said. “This revolution is evolving.”

The National Wealth Fund

Labour's spending plans include a new £8bn “Sovereign Wealth Fund” that will buy stakes in green projects in an attempt to counter the party's perceived lack of investment in the private sector.

“The idea that everything what the market will do for a return on investment in the long run is nonsense,” said George Dibb, an economist at the IPPR think tank. “The government can be much more patient than investors.”

The plans are meant to mimic Joe Biden's plans to lower inflation in the US and similar initiatives in Germany and Australia. Speaking in Washington DC on Wednesday, Ms Reeves called for a new “green special relationship” between the UK and the United States centered on a “clean energy economy.”

“Looking across the ocean at the Biden administration , the current UK government sees a subsidy arms race,” she said.

“Nations that share values ​​and concerns and want to seize the opportunities of tomorrow. can and should work together to enhance our collective resilience and security.”

Labor figures have made connections with leftist Western governments in the hope that they can copy investment plans and learn campaigning strategies to defeat the populist right. , said a senior party source.

Offensive economic charm

Earlier this week in New York, Ms. Reeves met with Biden-linked sociologist John Anzalone and Obama strategist David Axelrod.

After three years of Sir Keir Starmer's leadership, the party is still rehabilitating its extravagance. image of the Corbyn era and seeks to highlight its economic reputation in hopes of averting a post-first-budget farm-style financial market disaster.

Reeves, during her visit to the US, attempted to portray the Labor Party as the more financially responsible party. Photo: REUTERS/Brendan McDermid

“Over the past few days and weeks, the change has been that instead of discussing specific policies, we have told a coherent story about the economy,” a party source said. “If I were to ask you what Corbyn stands for on any issue, you could guess. We need to come to the same place as Keir.”

But the Labor leader and the Shadow Chancellor must also fend off accusations – fueled by their previous support for higher taxes and new wealth taxes – that the Labor government after joining government will pursue a more radical agenda.

Party sources insist “there is no hidden secret plan” for the economy, but acknowledge smaller policy measures already announced will be taken before how longer-term decisions will be made.


“Politics is about who pays. We looked at unearned wealth and fairness in the tax system,” one of them said. “But if you want to do something, you need to do it pretty fast… the bandwidth is limited.”

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