The Tories claim Labour will cost every household an extra £2,000 per year. The Tories claim this figure was made out of the civil service treasury report. The Labour Party have come out fiercely denying this will be the case. The devil, though, is in the detail and the future. Will Labour have to raise taxes? Will the UK be able to handle what is coming towards it economically?
Firstly, this edition is made on the 80th anniversary of D-Day where we commemorate the sacrifice of those who stormed the beaches of Nornandy in World War 2 from American, British and Canadian forces against the Germans. Though the British and Canadian beaches were not as difficult as the American ones, especially Omaha, the seizure of Bayeux where over 4,000 British graves now stand is a testament to the sacrifice of a great generation for liberty and the freedoms we all enjoy. “For your tomorrow we gave our today”.
As the campaigns rightly quieten down a bit so that the national focus turns on the grand anniversary of the D-Day landings there seems to be a ripple about this figure that was quoted quite a lot in the TV debate a couple of days ago. Sunak claimed that a Labour government would increase everyone’s taxes by on average £2,000 per year. This figure they claim came from Civil Service predictions based on planned expenditure, an inability to borrow money (as France’s credit rating went down yesterday) and income from taxes, and the gap in between. The Tories claim that Labour will need to raise money from all sections of the United Kingdom and claim a vote for the Tories will allow them to keep ‘lowering taxes’. They are really trying to sell themselves as the low tax party as we are living through the highest taxation rates in over 70 years.
Labour have claimed that this is a lie. Though the Civil Service have not come out to deny they produced the report and the figure, there is a certain amount of ambiguity as to the origin of this number. The shadow Chancellow Rachel Reeves has committed to no raising of income tax, national insurance or VAT (the big 3). Labour did NOT commit to preventating taxation on pensions, readjusting tax bands due to inflation and thereby saying they would allow something called ‘fiscal drag’ - there are tax thresholds in relation to how much you are paid per annum (something like up to 39k p/y you pay 20%, 40-59k you pay 30% and so on) and due to inflation and wage inflation people are dragged into higher tax ranges and are therefore paying more tax. Inflation on goods also increases VAT anyway as well. This is all part of something called ‘stealth taxes’ where you are paying more in real terms. One of the most infamous is the fact that people pay fuel duty on their petrol, and then VAT on the price of petrol AND fuel duty put together - so an example of a double tax. Labour are most likely going to rely on fiscal drag and stealth taxes to fund more public expenditure we imagine.
There is perhaps a bit of a problem here. Labour HAVE to increase public spending; it’s what they do. It’s their reason for being. A public energy company, more money for services (as it’s the only way to attempt short term improvement in public services) along with their spending commitments for defence and so on, will require more public expenditure without increased borrowing as Britain is in a debt crisis that is only getting worse. They say they are going to find the money from taxing private schools and scrapping the Non-Dom scheme but that will amount to a few billion a year at most; it’s peanuts in the grand scheme of things. They will need to find extra money somewhere, and with public debt service repayments now the third largest annual public expenditure this problem is only going to get more expensive.
Economic forecasters are gloomy. If Britain doesn’t get a grip over it’s spiral of public debt it is predicted that within 2 years of a Labour government there will be a request for a bail-out from the IMF. Coupled with the fact that Labour will most likely NEED to raise taxes next year anyway, Labour are trying to pretend right now that everything will be ok, but it is anything but ok. Britain is making a lot of money right now as the 4th largest exporter in the world (up from 7 a few years ago) but that depends on the health of the international market in the first place. Britain is very vulnerable to global market volatility and with many elections all over the world, 2 wars going on in the public eye, looming conflict elsewhere, Britain is banking on a world future that is becoming less and less likely with each passing month.
The domestic health of the UK is not much better. Over 5 million people on out-of-work benefits, a skills shortage in many different areas, productivity levels lower than France, GDP per head shrinking for the longest time since records began and inflation still above treasury targets at 2.8% with high interest rates, and a tax burden not seen since the 1940s, it really isn’t rosy at home. Innovation and entrepreneurship is not high in this country due to the domination of big business and over-reliance on cheap foreign labour cutting corners where innovation would otherwise thrive. Energy costs are higher in the UK than anywhere else in Europe by a frightening margin. You’d be forgiven for thinking the Tories WANT to lose this election, giving a hospital pass to Labour to sort out the seemingly unworkable economy.
Whatever is the truth of this £2,000 figure it is most likely a reality of life than an ‘evil Labour party’. Perhaps the Tories are being disingenuous about their commitment to cutting taxes; the money has to come from somewhere. But this is an election after all and they’ll say anything to get your vote. Labour and the Tories are filled with politicians who are looking to sell a vision rather than a reality but that is politics. It is up to the voters to decide who actually has a plan and who is merely window-dressing for a shop that has a looming economic bull about to smash a lot of fine china.
This article first appeared on the TDL website. For more information, articles and more please visit www.thetdltimes.com.
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