I know, it’s becoming a habit. The Chancellor has already backtracked on plans to scrap the winter fuel payment, and now looks set to retreat from her reckless attempt to squeeze more money out of foreign non-doms.
Unlike most commentators, I’ve no problem with U-turns.
If politicians get something badly wrong, they should have the decency to fix it.
Ideally, of course, they’d make the right call in the first place. But it’s too late for Reeves, who got almost everything wrong from day one.
The more of her plans she ditches, the better. And she shouldn’t stop with pensioners and non-doms. There’s another ticking time bomb that threatens serious economic damage. She must defuse it fast.
It will punish some of the most industrious people in Britain, cost the Treasury billions in lost revenue, and wreck what’s left of our enterprise culture.
It’s an ignorant, malicious tax raid – and it has to go.
I’m talking about Reeves’ vindictive move to slap inheritance tax (IHT) on family businesses. Although frankly, I could just as easily be talking about her attack on family farms.
Farmers have at least had some attention. Family businesses are being ignored. That needs to change.
Reeves is plotting changes to Agricultural Property Relief (APR) and Business Property Relief (BPR).
APR helps farming families pass on their land. BPR allows small businesses to transfer company assets between generations without a crippling tax bill. In October’s horror Budget, Reeves went after both.
It’s an act of economic vandalism that will blow up in her face. And ours.
As I wrote in November, family businesses have long been able to hand over their life’s work without the threat of IHT. That’s about to end.
I highlighted the case of Nova Laboratories, a Leicester-based pharmaceutical firm founded in 1994 by Peter White, now 76.
When he dies, his son James, Nova’s deputy managing director, faces a potential IHT bill of £26million.
They don’t have that money in the bank. It’s all tied up in the business. To pay the bill, they’d have to sell. Most likely to a marauding US private equity firm with zero interest in UK jobs, patients or research.
This isn’t tax justice. It’s destruction. And Reeves seems to think it’s smart policy. It’s not. It’s ideologically vindictive and economically illiterate.
Nova isn’t alone. Tens of thousands of firms are in the same boat, and hundreds of thousands of jobs are on the line.
Analysis by the CBI’s economics arm, commissioned by Family Business UK, warns Reeves’ tax raid could destroy more than 208,000 full-time jobs.
Many firms have already paused investment. Most expect lower turnover as a result.
The CBI reckons the policy could shrink the UK’s economic output by £15billion. And Reeves claims she’s pro-growth!
For what gain? A pitiful £1.4billion in extra tax, which could actually reduce revenues by £1.9billion once job losses and lower investment are factored in.
Over the years, the losses will run to billions.
In trying to fix one hole in the public finances, Reeves is blowing open a far bigger one. Just like with non-doms.
The case for a U-turn is overwhelming. She should make it now, before the damage gets even worse.
Critics may crow over yet another flip-flop. But it’s the right thing to do. And Reeves shouldn’t hang around.