Labour Minister Contradicts Reeves’ Pre-Election Promise Never to Levy Wealth Tax – Guido Fawkes

Labour Minister Contradicts Reeves’ Pre-Election Promise Never to Levy Wealth Tax

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Starmer is still facing growing pressure from his party over welfare reforms, with the Labour left naturally demanding higher taxes instead of spending cuts. Leading the charge this morning was Diane Abbott calling for a wealth tax, insisting that a 2% levy on assets over £10 million “shouldn’t have some massive effect” on incentives. Abbott’s hardly renowned for her prowess in calculus…

Labour minister Emma Reynolds was on the Today Programme shortly after Abbott, saying that as “we’ve already increased taxes by quite a substantial amount”, Labour won’t impose a wealth tax – for now:

“We’re not going to come forward for the time being. I mean, I can’t come forward on future Budgets, of course, but for the time being we are not going to come forward with a wealth tax.”

Translation: the door is still wide open on a wealth tax. A wealth tax would be yet another broken promise by Reeves, who stated unequivocally that Labour had “no plans for a wealth tax” back in August 2023. Though she also said back then she’d find it hard to raise taxes at all, and co-conspirators saw how that turned out…

A reminder:

• Britain’s top 1% of earners already pay 29.1% of all income tax.
• The Centre for Policy Exchange estimated that a wealth tax would see the UK fall to 34th out of 38 OECD countries on the international Tax Competitiveness Index.
• The Taxpayers’ Alliance estimates that UK wealth tax levied on the top 1% with a threshold of £1 million would imply a reduction in taxable wealth of around £260 billion.
• For a taxpayer holding a long-term bond with a fixed 3% annual interest, a 6% wealth tax is effectively a 200% income tax- taking twice the earned interest. An 8% wealth tax would be a staggering 267% income tax. So a 2% per year wealth tax is equivalent to a 66.67% income tax on the bond’s interest income…
• A 1% top-rate wealth tax cut in Switzerland increases reported wealth by 43%, according to modelling by CESifo.
• Annualised wealth taxation is logistically extremely difficult to carry out, especially as numerous assets are prohibitively impractical to value.
• More than a dozen European countries have imposed and then scrapped wealth taxes – which failed. In 2017 France repealed its wealth tax, which had been in place since 1988 and yielded about 1.5% of total tax revenue in most years. It is calculated to have caused an annual fiscal shortfall of €7 billion, roughly double what it yielded in revenue. Around 60,000 millionaires fled between 2000 and 2016, taking jobs, investment, and tax revenue with them…

The Adam Smith Institute’s Director of Public Affairs Maxwell Marlow said:

“With more wealthy individuals fleeing the UK than ever before, the government cannot keep plucking the golden goose. Already, 60% of all income tax receipts come from the top 10% of earners, and this high tax burden is pushing the wealthy away – a wealth tax would be the final nail in the coffin.”

Labour pledged a wealth tax in its 1974 manifesto but abandoned plans. Reeves’ predecessor Dennis Healey noted:“We had committed ourselves to a wealth tax; but in five years I found it impossible to draft one which would yield enough revenue to be worth the administrative cost and the political hassle”. Britain’s top wealth creators will be keeping their passports ready…