5 June 2024

Taxation is back on the political radar


Rishi Sunak came to the first of the leaders’ debates in this general election campaign with one aim above all others: to drum into the heads of viewers the idea that Labour will increase taxes on the British people to the tune of £2,000. Working on the old adage of political campaigning – that when you are absolutely sick of repeating a slogan is the point at which it is just about beginning to sink into the heads of the public – the Prime Minister repeated the figure ad nauseum.

Keir Starmer clearly had no prepared response to this accusation – which is odd given that the figure was put about by the Conservatives a few weeks ago. Even less explicably, he didn’t seem to be able to concoct a retort on the hoof either. For a former barrister who prides himself on a forensic performance at the despatch box, that is something of an embarrassment.

But why did Starmer have such a feeble response? It is hard to escape the possibility that Sunak might just be right. Sunak’s claim originates from a Tory dossier which analysed spending pledges made by Labour and matched them against estimated income from the tax increases so far announced.

It came to the conclusion that Labour’s commitments would involve an extra £58.9bn of spending over the next four years, but that the party’s tax rises would raise only £20.4bn over that period. The £38bn gap was then divided by the number of households in Britain to produce the figure of £2,094.

The claim is not entirely fair on the part of the Conservatives. Not all taxes, of course, fall upon households, or at least not directly. Businesses pay taxes, too. Moreover, when Sunak repeated the figure I assumed that he meant Labour would burden us with tax rises of £2,000 per year. In fact, the claimed tax rises were spread over four years – in other words, just over £500 a year. That sounds a lot less dramatic.

Yet the Prime Minister could have pushed Starmer rather harder on the apparent black hole in Labour’s tax and spend policies – in particular on Labour’s ‘Green Prosperity Plan’, which was by far the single biggest item mentioned in the Conservative Party document.

In return for this, Labour claims it will deliver 100% clean energy by 2030. No one can accuse the Conservatives of making this up – it comes from Labour’s own estimate of what it thinks it would cost to achieve this – £23.7bn over five years, which the Conservative document edited down to £18.96bn over four years.

Yet many people put the potential cost of decarbonising the grid far, far higher – if it can be achieved at all by 2030. According to a report by energy consultants Aurora Energy, it could cost £116bn, for example. Until recently, Labour itself said to would commit to the task £28bn each and every year over the life of the next Parliament. It has failed to explain how it now thinks it can do the job for £23.7bn altogether.

This is the trouble for Starmer and Labour: when Rishi Sunak puts about the £2,000 figure in extra tax rises under Labour, he is tempting us all to fact-check it. And when we do, it is hard not to come to the conclusion that this could be a horrendous under-estimate thanks to the vast cost of decarbonising the grid.

Starmer did score a number of points over Sunak during the debate, most obviously on hospital waiting lists. The Prime Minister made a pledge last year to reduce them, and yet they are higher now than they were then, even if they have fallen from their peak last September. It is hard to construe that as a success, as Sunak tried to do.

Yet it is Sunak’s claim of £2,000 in extra taxes under Labour which seems to be sticking. According to a rapid YouGov poll, Sunak was judged to have won the debate by a very narrow margin. Given that he is 20 points or more behind in the polls, the Tories must regard that as a success.

Labour has yet to produce its manifesto and associated costings. But all eyes will now be upon it. Fears of high taxation have long been a sticking point for Labour’s electoral chances – John Smith’s shadow budget in 1992 may have helped to scupper a Labour victory that year.

The party will likely go on to triumph in this election, regardless of a below-par performance by Keir Starmer in the first leaders’ debate. But taxation is now firmly on the political radar in a way it wasn’t before yesterday.

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Ross Clark is a journalist and author.

Columns are the author's own opinion and do not necessarily reflect the views of CapX.