Rachel Reeves has already hiked taxes by £40billion and will be back for more this autumn as she scrambles to balance the books. Yet many in the Labour Party want her to go even further. Much further.
A wealth tax is back on the table, despite being dismissed as impractical and unworkable by experts both on the left and right. But that hasn’t stopped former Labour leader Neil Kinnock from pushing for it. Once again demonstrating why he was the worst Labour prime minister we never had (with apologies to Ed Miliband and Jeremy Corbyn).
After failing to land the top job in 1992, Kinnock now seems determined to sabotage the economy from the sidelines.
What he probably doesn’t realise is that his latest wheeze would end up punishing some of the most vulnerable people in society.
Speaking to the i Paper, Lord Kinnock called on Reeves to extend VAT to private medical insurance.
His logic? If Labour is charging VAT on private school fees, it should slap VAT on private healthcare too. He claimed it could raise more than £2billion and help fund public services. He pitched it as a fairness issue.
Labour activists will no doubt leap at the idea. They assume only the rich go private, and therefore deserve to be clobbered.
But Richard Murphy, a tax blogger and campaigner at Tax Research UK, has torn Kinnock’s proposal to shreds.
Murphy has no problem with hiking taxes but unlike many on the left, including our Chancellor, he actually understands how the tax system works.
He’s already rubbished the idea of a wealth tax in these pages, calling it impractical and doomed to fail.
Now he’s taken aim at Kinnock’s harebrained idea to slap VAT on private healthcare, calling it “a plan to make life harder for many and to increase inequality”.
Murphy pointed out that extending VAT to private healthcare would hit a whole host of other things too.
He wrote: “It would be virtually impossible to reform VAT so that there was a charge on what Kinnock describes as private medicine without at the same time charging VAT on dentistry, or on glasses, or on things like chiropody, which many older people rely upon.”
Other services, such as osteopathy and some forms of physiotherapy, would also be hit. These are rarely covered by the NHS. People have to pay from their own pockets.
Murphy is right. Many pensioners rely on them – not out of luxury, but necessity. And many are already under pressure from rising taxes and living costs.
The idea that they should now face a 20% tax for trying to stay mobile, manage chronic pain or see properly isn’t just foolish. It’s cruel.
Murphy is damning: “Kinnock is putting forward a plan to make life harder for many and to increase inequality. Is that what he really wants?”
His has a final swipe at Kinnock saying that “those who do not know very much about tax sometimes make complete fools of themselves by making suggestions on tax reform”.
Which is certainly the case here.
Like the wealth tax, this policy is a non-starter. It should be put out to grass now. Along with Neil Kinnock.