16 June 2024

Tax is back on the agenda


As the election campaign passes its halfway point, the last few days marked a critical juncture in the race with the release of a number of manifestos.

The first of the main contenders to set out his stall was Rishi Sunak, who on Tuesday took to the Silverstone race track to sell his party’s vision.

The only surprise announcement in the Tory manifesto was the abolition of National Insurance for the self-employed, a measure to be paid for by cutting welfare and cracking down on tax avoidance. It didn’t take Nostradamus to predict the rest. Sunak’s other pledges included regular flights to Rwanda, the return of Help to Buy, tougher sentences for criminals and increased spending on defence.

Keir Starmer’s response came on Thursday, when he traveled to Manchester to lay out his ‘serious plan’ for Britain. Coming in at 26,491 words, Labour’s offering is a longer document than the Conservatives’, but is similarly predictable.

On tax, Starmer effectively remained silent (by now a tried and tested strategy), repeating the line that Labour has ‘no tax surprises’ planned for VAT, NI or corporation tax. The rest consisted of the same commitments we have heard throughout the campaign, such as repealing the Rwanda Act, enacting (potentially damaging) constitutional reforms, building 1.5m homes and overhauling the childcare system.

So far, so dull, you might say. But while the manifestos themselves may not not have been much to write home about, the subsequent newspaper headlines revealed something interesting – that rather than migration or defence, it is the decidedly less sexy topic of taxation which is coming to define this election.

Although the mere utterance of the t-word is enough to send many to sleep, it is one of the most pressing issues facing Britain. By now, I’m sure the fact that our tax burden is at its highest point since WWII is burned onto your frontal lobe, but it’s true, and it’s hampering our growth. In the same breath, it should also be noted that our tax system has become mind-bendingly complicated, stifling our international competitiveness.

Despite the increasing complexity and cost of the tax we’re having to pay, Britons aren’t seeing much of a return. As Sam Bidwell pointed out in CapX this week, the young are getting a particularly raw deal. He argues that young people are paying top whack to support the needs of politically ring-fenced geriatrics while public services fail to deliver basic obligations and house prices soar.

But it’s not just the young who are getting the unluckier end of the tax stick. The Institute for Fiscal Studies released figures this week which show that older, higher earners are feeling the squeeze too. According to the report, the share of adults paying the higher or additional rates of tax has more than doubled from 6% of the adult population in 2010-11 to 13% now. The proportion of over-65s paying income tax has also risen from 48% to 65% in the same period.

So, what to make of all this? Although it has been pointed out that neither manifestos offer the reforms needed to drastically improve our tax system, and that Labour’s commitment to no unexpected tax rises should be taken with a pinch of salt, there is something positive to be gleaned from the last few days.

In an election which many are regarding as a foregone conclusion, it is, at the very least, welcome for commentators to have shifted their attention from querying the personalities involved to scrutinising the implications of their policies. After all, when whoever wins on July 4 is confronted by the scale of the challenges Britain faces, whether they grew up with Sky TV or a toolmaker for a father will suddenly seem rather unimportant.

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Joseph Dinnage is Deputy Editor of CapX.