Britain’s leftist government won the national elections last year on a pledge for no new taxes on working people but now refusing to rule out tax rises, claiming “the world has changed” and stating manifesto promises are only good until “decisions” are taken.
Britain’s perpetually embattled Chancellor of the Exchequer (finance minister) Rachel Reeves gave the clearest indications yet that her election-time promise not to hike taxes for the public is not to survive in her marathon 45-minute Labour Party Conference speech on Monday
Her party had pledged to voters in its manifesto (platform) last year that “Labour will not increase taxes on working people, which is why we will not increase National Insurance, income tax or VAT”, but told the conference hall that she could only now promise to keep taxes “as low as possible”. Blaming the previous government for the state of the economy — not entirely unreasonably given its own mismanagement, but with less credibility than ever given it has now been out of power 14 months — and “harsh global headwinds”, Reeves said the decisions she now had to make on taxing and spending were “harder” than before.
This blame-game of citing every external factor going was already well practiced before Reeves took the stage today. Ahead of the speech, she spoke to state media BBC Radio 4 on Monday morning, and tacitly made U.S. President Donald Trump and Russian President Vladimir Putin the blame-carriers for her work.
In a morning of media interviews where Reeves repeatedly refused to give a “simple yes or no answer” on whether she could rule out tax rises, she told the BBC: “Well, look, I think everyone can see in the last year that the world has changed, and we’re not immune to that change.
“Whether it is wars in Europe and the Middle East, whether it is increased barriers to trade because of tariffs coming from the United States, whether it is the global cost of borrowing, we’re not immune to any of those things”. Even the BBC interpreted these remarks as a pre-emptive justification for tax rises to come.
One rhetorical device to side-step giving plain answers deployed by both Reeves and her boss, the Prime Minister Sir Keir Starmer, is an insistence that manifesto commitments still “stand”. Yet senior government insider, the Chief Secretary to the Prime Minister Darren Jones decoded this message on Monday, The Telegraph reported, when he made clear there is no expectation internally these commitments will be respected in the long run, and will be discarded as required.
He is reported to have said: “The manifesto stands today because decisions haven’t been taken yet. We’ve got forecasts coming from the Office for Budget Responsibility. We don’t know what those say yet.”
Any tax rises, should they come, will be announced in the UK government’s budget that will be announced by Reeves in November. While nothing is yet official, some have speculated the Chancellor will tinker with the UK’s sales tax known as VAT. Given it is a consumption tax paid by ordinary people, this would clearly be a contravention of the no “taxes on working people” pledge. Other more subtle, but no less punishing, measures could include further freezing tax thresholds, so called ‘stealth taxes’ or, more technically, fiscal drag.
Fiscal drag was a favourite cash-grab for the previous Conservative government, and as reported of their deployment then:
This cash grab will be achieved without the government having to deal with a bad news cycle as is typical when announcing a visible tax rise. Instead, taxes will soar automatically by having arbitrary income tax bands and not adjusting them, as a just state would, as incomes rise with inflation.
The impact of this, which has been going on for decades but has reached “totally unprecedented” levels under the present Conservative administration, is best seen in the upper tax bracket, which was first created decades ago to punish the super-wealthy. Today, a failure to adjust the threshold as inflation soars has seen upper-working and middle-class occupations like teachers, nurses, and police officers dragged into the punishment band.
As late as 2003 not a single nurse in the UK paid tax in the top band, but a decade later tens of thousands did, and now hundreds of thousands do. Nurses are not meaningfully any wealthier in 2023 than 20 years ago, but they are taxed more.
By 2028, it is thought a fifth of all taxpayers will be paying the 40 per cent higher tax rate once meant only for the very wealthy.
While speculation races now on whether Reeves will hike taxes later this year, it has been previously argued that the cordon on that manifesto promise not to add more levies onto working people has already been broken, and was just months after last year’s election. As reported, Reeves increased employers’ taxes last year in a way that she had described, while in opposition, as punishing on workers themselves.
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