Rachel Reeves will this week lay out the full cost of Conservative party economic neglect. Initial findings, according to Labour briefings, put the cost of the repair job at about £20bn, though there is also a strong hint that the final bill, when it is announced on Monday, will be much higher.
The exercise is a chance for the chancellor to send a message to her own supporters to ease off on demands for extra spending. Reeves will say the Tories’ reckless and inept handling has pushed the government’s finances further into the red than was previously understood.
A message will also go out to the many people who didn’t vote Labour – let’s remember that about 80% of the UK electorate didn’t put an X against the name of a Labour candidate – that the deficit in the public finances warrants some tax rises.
There is growing speculation that Reeves will signal a series of wealth tax rises, possibly increasing the rate paid on capital gains and the tax on inherited wealth, as a means to plug some of the holes.
The question Labour advisers are asking themselves is whether they have prepared the ground for extra taxes on wealth, and how they will be received by those who could end up paying them. More importantly, what will be the reaction of people who, rightly or wrongly, think they might be forced to pay such taxes at some time in the future.
Most of the western world now finds itself in need of a tax reset, but what is lacking is the kind of crisis that triggers a deep questioning of how we pay for public services and welfare benefits. The pandemic and a war in Europe have not been enough to spark collective soul searching about the nature of 21st-century capitalism.
Even though many have changed the way they live and work – moving out of cities or back to live with parents, coping with long Covid or retiring early – most voters try to forget the pandemic ever happened.
Back in 2008, there was hope that the financial crash would strengthen the argument of those who said handing tax breaks to bankers and the super-rich in search of financial gain brought only instability and a relatively small number of winners.
Those voices weren’t heard and instead we soldier on, unable to confront the fact that a minority of people and businesses, by virtue of their wealth, wield tremendous power and entrench their elevated position while everyone else scrabbles to maintain some semblance of their previous standard of living.
It was said during the general election campaign that Keir Starmer should invoke the memory of Clement Attlee to inject some radicalism into his programme. The postwar Labour government nationalised, invested and created new universal services, much of it paid for by higher taxes on the better-off.
Starmer was asked why he shied away from following in Attlee’s footsteps when the benefits were so consequential that a prime minister in power almost 80 years ago remains a hero today.
One of the main reasons is that Attlee benefited from a crisis that saw everyone suffer. Rich and poor. Young and old. Men and women. No one escaped the terrible consequences of the second world war.
More recently, governments have found the money to protect the majority from the worst effects of successive crises, and in so doing, inured them to the harm done.
We know global wealth inequality has risen significantly: Oxfam reports that the richest 1% has grabbed two-thirds of all new wealth created since 2020.
Joe Biden has tried to make a case against trickle-down economics, talking explicitly about the need to confront the fallacious concept of wealth creation from the charitable donations, tips and occasional investments in productive jobs (as opposed to property) that characterises late-stage capitalism.
Biden has proposed a 25% tax on wealth of more than $100m, calculating that it would raise $500bn over 10 years to help fund benefits such as childcare and paid parental leave. Brazil, which chairs the G20, is pushing for a minimum 2% levy on the world’s 3,000 richest billionaires. Biden argues that his tax is fair because it would push the average tax rate for America’s 1,000 billionaires from 8.2% to nearer the 25% paid by the average US worker.
The same argument needs to be made in the UK. Unless the British public are convinced that the super-rich can and should pay something nearer the average tax rate, why would they countenance higher levies on their own wealth?
Labour plans to tackle some of the tax loopholes used by the super-rich. That should be a starting point for a wider, government-sponsored debate about entrenched wealth and how we should tax it.