Rather than cutting spending, they want her to drive UK taxes higher still and have revived a very bad idea they think will solve all of the UK’s problems.
I don’t think it will.
There’s no question that the economy is in a mess. In the six months before last year’s general election, it grew 1.4% with the usually level-headed Office for National Statistics described the economy as going “gangbusters”.
We’re no longer going gangbusters, just bust.
In the first six months after Reeves took charge, GDP growth shrank to just 0.1% as she talked down the economy and menaced us with hike taxes.
Which duly came when Reeves announced £40billion worth of extra taxes in her Budget, on top of all the old ones.
That destroyed growth as businesses stopped investing and consumers stopped spending.
Last week, the Office for Budget Responsibility has halved its 2024 growth forecast from 2% to just 1%. The Bank of England is even gloomier at 0.7%.
The UK tax burden will hit a record higher 37.5% of GDP this Parliament, but Labour activists are demanding more.
As well as hiking all the old taxes, it wants her to introduce a brand-new levy as well. And they’ve come up with a very bad idea that Labour rejected in the 1970s, during the last period of tax hiking frenzy.
They want Reeves to introduce a UK wealth tax.
This idea is gaining traction among activists, led by the left’s latest golden boy, ex-City trader turned equality campaigner Gary Stevenson.
A host of campaign groups, including Oxfam, Patriotic Millionaires UK, and Tax Justice UK, are also pushing for it.
They claim a 2% wealth tax on those with net assets over £10million could raise £24billion a year, while affecting just 20,000 people.
Three-quarters of Britons would prefer taxing the very richest over cutting public spending, according to Oxfam research.
The appeal is obvious. More than 99% of the population aren’t millionaires (me included) so this tax wouldn’t touch us.
It sounds like a golden ticket, solving all of our fiscal problems in one fell swoop. Except it won’t.
Labour Chancellor Denis Healey shot the idea down in 1976, despite promising to do so. He said: “In five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and political hassle.”
A wealth tax would a logistical nightmare, requiring annual valuations of all assets, leading to mass tax avoidance and capital flight.
Reeves already increased a form of wealth tax – capital gains tax – and lost £23 billion as a result. A full-scale wealth tax would almost certainly cost more than it raises, as the rich find ways to dodge it or flee the UK.
Amid all the fuss, confidence and growth would be shattered, the economy would shrink at an even faster rate, and tax revenues would fall.
At which point the left would no doubt double down on the wealth tax, so that more of us paid.
And thanks to fiscal drag, their numbers would increase every year.
Wealth taxes aren’t just for the super-rich. Norway has one. That kicks in at £150,000 of assets. The same would be likely to happen here, if it sneaked in.
Even Reeves isn’t daft enough to introduce one, is she? Let’s see how desperate she gets.
