Labour Conference 2021: Labour promises biggest overhaul of business taxation in a generation

The Brighton gathering also saw a significant announcement on employment rights and some more detail about Labour’s replacement for universal credit.

You can read our full report on tax and related discussion at the Labour conference below.

Contents:

• Three tax principles – fairness, efficiency, support for business
• Business taxation: higher taxes for online giants, lower taxes for the high street
• Personal taxation: no to NICs rise, but lack of clarity on alternative
• Value for money: Reeves to turn ‘laser focus’ on reliefs
• Wealth tax: interest growing but only on the fringes
• Property taxes: warning over 2022 ‘council tax bomb’
• Towards net zero – but in a socially just way
• Employment rights: Labour propose increased worker rights with single enforcement body
• Supporting low earners: higher minimum wage, more generous universal credit
• Pro-business, pro-reform of business
• The self-employed – calls for improved rights, better support
• The Everyday Economy
• Conference News in Brief

Three tax principles – fairness, efficiency, support for business

In his conference speech Labour leader Sir Keir Starmer said Labour’s approach to taxation would bgoverned by three principles: the greater part of the burden should not fall on working people; the balance between smaller and larger businesses should be fair; and ‘we will chase down every penny to ensure that working people, paying their taxes, always get value for money’.

In an interview with the BBC during the conference, Starmer did not rule out tax rises if Labour wins power, but he promised they would ‘not unfairly hit working families’. The party leader told Andrew Marr: "We want those with the broadest shoulders to pay." But he said it was too far from an election to make firm tax commitments.

In her conference speech Shadow Chancellor Rachel Reeves promised a ‘fresh approach’ to the economy which means looking again at how our tax system works. She also set out three ‘principles that underlie our approach to taxation’, broadly in line with Starmer’s but framed slightly differently: making the tax system fairer, bringing a ‘laser focus’ to efficiency in the tax system, and supporting high streets.

The policies likely to flow from these principles are explored in the next three sections.

Labour also set out the party’s fiscal rules at the conference. Reeves said Labour would pledge to balance the current budget in the medium term, ensuring that tax revenues at least match day-to-day public expenditure, and that the burden of public debt is on a downward trajectory. The Financial Times noted that these rules are essentially identical to those in the 2019 Conservative manifesto that Sunak is set to announce in his Budget on October 27, but that while the chancellor wants to achieve his rules by 2024-25, Labour is likely to give itself a little more time before they become binding.

Business taxation: higher taxes for online giants, lower taxes for the high street

Labour would scrap business rates and raise the Digital Services Tax, as part of what Shadow Chancellor Rachel Reeves called “the biggest overhaul of business taxation in a generation”. The central theme of the overhaul seems to be rebalancing the tax burden away from high street businesses and onto large tech firms.

Reeves won praise from businesses large and small for her announcement that Labour would scrap business rates in England. While not specifying what they would be replaced with, it appears it would continue to be a levy based on property values, as Reeves said it would reward businesses that move into empty premises, and an earlier draft of her speech, briefed out by the party, said it would also feature more frequent revaluations, with instant reductions in bills where property values fall, as well as encouraging green improvements to businesses. Reeves additionally said in her speech that the replacement would incentivise investment and promote entrepreneurship, and that no public services or local authorities would lose out from the changes.

In their 2019 general election manifesto, Labour said they would "review the option of a land value tax on commercial landlords” as an alternative to business rates. This seems likely to be where the party ends up. It would not be surprising if it ended up looking very similar to the Liberal Democrat policy of a Commercial Landowner Levy.

Tony Danker, director general of the CBI, spoke on the conference fringe and said that reform to the "outdated system" of business rates was "chronically overdue". Federation of Small Business Wales Policy Chair Ben Francis called for the Labour Welsh Government to follow Reeves’ lead and set about devising proposals for reform of the system in Wales. He branded business rates an arbitrary and regressive system, which was no longer fit for purpose.

CIOT asked a fringe panel what they would replace business rates with. None of them (including an FSB representative) was willing to venture a suggestion. BEIS committee chair Darren Jones MP stressed the importance of consultation and said he wouldn’t want to pre-empt that.

In the short-term Reeves said in her speech that the government should freeze business rates next year and increase the threshold for small business rates relief, giving small and medium sized businesses in all sectors a discount next year. She said many high street businesses are still struggling right now, with a ‘cliff-edge’ in rates relief coming up in March 2022. Four out of five retail businesses are warning they may have to close outlets if the government does not act, she added.

Reeves said to raise money to help the high street the government should increase the Digital Services Tax (DST) to 12 per cent for the next year, to make sure online companies that have thrived during this pandemic are paying their fair share. She said: “High street businesses pay over a third of business rates, despite making up only 15 per cent of the overall economy. But when Amazon’s revenues went up by almost £2 billion last year, how much did their tax go up? Less than one percent.” It is time to ‘level the playing field’, she said, saying that the business tax system would not be fit for purpose so long as bricks-and-mortar, high street businesses are taxed more heavily than online giants.

Reeves said the DST rise is just for the next year, though she also said that it is until a global minimum corporate tax rate is agreed. She did not seem to envisage any scenario where a global minimum rate is not in place within the next year.

Labour would like to see a global minimum rate of at least 21 per cent, as presented originally by President Biden, rather than the 15 per cent in the initial agreement. Corporation tax did not feature prominently at the conference. The party backed the Conservative announcement of an increase to 25 per cent in 2023, while pointing out what they see as the contradictions in Conservative policy.

More broadly, at a CBI question time, Reeves said she wants to reduce the overall burden of taxation on business. She also spoke of her wish to collect tax from foreign companies based on users and revenues in the UK. These companies benefit from our infrastructure, but they do not contribute to its maintenance, she said.

A motion on high street and business recovery was carried by the conference. It calls on the party to challenge the government to establish continuing economic support for those affected by COVID-19, to support local leaders to regenerate high streets and rebuild post Covid and post pandemic for a net-zero economy. It also calls for the reform of UK tax law to ensure that companies pay their fair share of tax through tackling tax avoidance and the use of offshore havens, to include a digital tax.

A speaker from the Opinium agency presented research of SME views commissioned by the internal group SME4Labour to a fringe meeting. They had asked how helpful certain government policies could be to business. All seven asked about commanded majority support but the most popular were:

• Reform business taxation in a way that levels the playing field between the major online retailers and bricks-and-mortar SMEs (68% support)
• Restore tax forbearance for SMEs and stop interest charges on small firms who delayed payment during the pandemic (68% support)
• A business rates holiday until December 2022 instead of the partial relief that is due to expire in March next year (64% support)
• Extend to December 2022 the VAT reduction for tourism and hospitality which is due to expire next month (63% support)

Personal taxation: no to NICs rise, but lack of clarity on alternative

Labour are opposed to the national insurance increase and to the health and social care levy but have not said explicitly what they would put in their place. The usual formulation is that they would target ‘those with the broadest shoulders’. Capital gains tax increases are being considered. Income tax rises are not being planned, but are not being ruled out either.

Labour’s position on the NI rise had been set out by Keir Starmer ahead of the conference. He told the Daily Mirror in early September: "We do need more investment in the NHS and social care but National Insurance, this way of doing it, simply hits low earners, it hits young people and it hits businesses.” Across the House of Commons he accused the Prime Minister of “choosing to take a tax system that is already loaded against working people and making it even more unfair”.

So what would Labour do instead? On 9 September The Guardian had reported that there was private frustration among some Labour MPs that Starmer had not produced an alternative to the government’s plans. Five days later The Times ran an article headed ‘Starmer calls for capital gains overhaul to fund social care’ – but the quotes in the article do not quite justify the headline. Starmer had told the paper: “Our analysis is that you could raise this money in other ways, whether that’s capital gains tax, whether that’s on properties, stocks and shares or dividends.”

Labour fought the 2019 election on a policy of taxing capital gains and dividends at income tax rates with a single allowance. The current status of this policy is unclear. The Sunday Times interviewed Rachel Reeves at the start of the conference and reported that she “wants to abolish the anomaly that people pay capital gains tax at 28 per cent rather than at the same rate as income tax”, but this was not a direct quote from her and could reflect a misunderstanding of the proposal to tackle the carried interest ‘loophole’ (see next section).

Reeves told the Sunday Times that: “We should use the tax system to ask those with the broader shoulders to contribute more.” In response to questioning from the paper she said: “I don’t have any plans to increase the rates of income tax”, but “I do think that people who get their income through wealth should have to pay more.” She identified “people who get their incomes through stocks and shares and buy-to-let properties” as targets for tax rises.

That position on income tax contradicted one of Keir Starmer’s 10 pledges to the party during last year’s leadership election. Under the heading of ‘Economic Justice’ he had promised to “Increase income tax for the top 5% of earners” (that is, retain the 2019 election policy of raising income tax for those earning over £80,000 a year). Starmer was asked about this on BBC’s Marr programme on the Sunday of conference and determinedly kept his options open.

“We are looking at tax. Nothing is off the table. But Andrew, we don’t know what the state of the national finances will be as we go into the election and nor does anyone else,” Starmer told the interviewer. “What Rachel Reeves said is she is not currently considering income tax, and that is fine. But what I am saying is as we go into the election we will apply the principles we have set out to the situation as it arises. What we don’t want to do whether it is income tax or any other type of tax – national insurance – is unfairly to hit working families, which is what this government is doing”.

The following day, on the Today programme, Reeves emphasised: “We have absolutely no plans to raise income tax.” Her position and that set out by Starmer are not contradictory. It is possible to have no plans to do something and to not be actively considering it, while not ruling it out for the future, but the different emphases led, perhaps harshly, to accusations of ‘confusion’ and ‘mixed messages’ from the media.

Neither Reeves nor Starmer’s conference speeches added much on this topic. Reeves promised to ensure that those at the top pay their ‘fair share’ of tax. She cited an example of a police constable on £27,000 who is taxed at 32 pence in the pound, while someone making ‘many times more’ from buying and selling stocks and shares pays just 20 pence in the pound. She promised Labour would not balance the books on the ‘backs of working people’.

Value for money: Reeves to turn ‘laser focus’ on reliefs

The third of Labour’s three tax principles is value for money. The party is promising to review ‘every single tax break’ (do they know there are 1,190?) and has identified two they will scrap for starters, targeting private equity bosses and private schools.

Setting out her aims in her conference speech, Rachel Reeves committed to “bring a laser focus to efficiency in our tax system”. “There are hundreds of different tax breaks,” she said. “Some are important, but too many simply provide loopholes for those who can afford the best advice. And added together they cost more than our entire NHS budget. So we will look at every single tax break. If it doesn’t deliver for the taxpayer or for the economy then we will scrap it.”

She identified two in her speech “that we’d scrap straight away”. The first of these is the carried interest ‘loophole’ that enables private equity bosses to pay tax at capital gains tax rather than income tax rates. That is indefensible so we will abolish it, she charged. The second is ending the exemption from business rates and VAT that private schools enjoy because of their charitable status.

On first analysis, arguably neither of these is an actual scrapping of a relief. Rather Labour appear to be proposing to reclassify ‘carried interest’ as income rather than a capital gain, and to remove the charitable status of private schools so they no longer get the tax breaks associated with that.

Neither of these policies is new for the party. Labour fought the 2019 election with a manifesto promise to “close the tax loopholes enjoyed by elite private schools and use that money to improve the lives of all children”. (Similarly, Reeves promised the £1.7 billion proceeds of scrapping the tax breaks for private schools would go ‘straight into our state schools’.) Abolishing the carried interest ‘loophole’ was in the 2017 manifesto. It wasn’t repeated in 2019, but only because raising capital gains tax to income tax rates rendered it unnecessary.

According to research by the University of Warwick and the London School of Economics, reported by the Financial Times in September, just over 2,000 people received £2.3 billion in carried interest in 2017 (the latest figures available). Taxing this as income instead of capital gains would have raised £440 million, assuming the recipients paid the higher tax rather than left the country to avoid it, the report found. 

Interestingly, while Reeves mentioned only those ‘tax breaks’ in her speech, in an interview with the Financial Times published the same day, she also picked out tax breaks for non-doms and venture capital trusts as requiring particular scrutiny. (At the last election Labour had a policy of abolishing non-dom status.) She additionally promised that the VAT exemption on food would be ‘sacrosanct’.

The focus on tax reliefs has been a theme of Labour for some years and also of the Public Accounts Committee under the chairmanship of Labour’s Meg Hillier. Anneliese Dodds (the then Shadow Chancellor) told the CIOT/IFS fringe meeting at last year’s online Labour conference that there was a lack of scrutiny as to whether reliefs achieve their objectives. At the 2019 election, when John McDonnell was Shadow Chancellor, Labour promised a review of corporate tax reliefs, with a target of reducing them by £4.3 billion. 

This policy does seem to be broader, and has been briefed as ‘a review of all government tax reliefs, worth £170 billion in total’. While this is a large amount the lion’s share is taken up by a small number of reliefs. Relief on pension contributions costs £41 billion. Capital gains tax private residence relief costs £25 billion. The larger VAT zero and reduced rates together cost £56 billion (of which the largest, the zero rate for food, costs £19 billion). R&D reliefs cost just over £7 billion. With the possible exception of higher rate pension relief it is difficult to imagine Labour taking large chunks out of any of these.

Wealth tax: interest growing but only on the fringes

Two events on the fringe considered the potential for a wealth tax. The idea has some support in the party but the leadership seem more likely to favour subtler approaches to parting the wealthy from a slice of their assets, such as changes to capital gains tax and abolition of tax breaks (see earlier sections).

At a well attended CIOT/IFS fringe event, Dame Angela Eagle, a member of the House of Commons Treasury Select Committee, noted that the cross-party committee had not ruled out a one off wealth tax in its report earlier this year. Eagle, a former Treasury minister, said that this reflected the shifting debate in British politics around the need to rebuild the public finances after the pandemic. She told the audience that it was time to ‘start thinking about the unthinkable’ to balance the books and rebuild society to make it more equal. Emphasising that she was speaking for herself rather than as a party spokesperson, Eagle said she was open to a one-off wealth tax as suggested by the Wealth Tax Commission but suggested ‘we need to call the bluff of people who keep money offshore’. In the absence of an explicit wealth tax, improvements could be made by tackling distortions in inheritance tax and capital gains tax, she thought.

The CIOT/IFS debate (full report here) also heard from Helen Miller of IFS and Arun Advani, one of the Wealth Tax Commissioners. Miller noted that three-quarters of wealth is stored in housing and pensions, meaning that a broad wealth tax has the potential to sweep a wide range of people into its scope. She argued that rather than a new tax, government should look to use the existing tax regime, citing – like Eagle – the capital gains and inheritance tax regime as options for targeted reforms. Advani said that a one-off wealth tax would be ‘economically efficient’ to pay for the pandemic. Since it is based on wealth at a (past) point in time, it would not distort behaviour, he argued.

At a separate fringe event, Torsten Bell, Chief Executive of the Resolution Foundation (and a former Director of Policy for the Labour Party), observed that taxes on wealth have been flat since the 1980s. He complained about the exemptions on inheritance tax, branded capital gains tax a ‘disaster’ of a tax in terms of how it is designed and said that while stamp duty land tax is progressive, it hampers people’s ability to move homes. Somewhat gloomily, he suggested history shows it takes a ‘very large war’ to reduce wage inequality because of the shared sacrifice in such an event.

There was a lot of discussion of taxing wealth around – and ahead of – the conference, but often from people meaning quite different things. In The Observer in September, TUC chief Frances O’Grady wrote that it was “time to raise taxes on wealth to fund social care properly” but the rest of the article makes clear that she is talking specifically about equalising capital gains and income tax rates. Andy Burnham, Mayor of Greater Manchester, called on the conference fringe for a wealth tax to fund a ‘National Care Service’, but was referring to a tax specifically on property wealth (see next section) and also a 10 per cent additional levy on people’s assets at death (a version of a policy he advocated as health secretary, dubbed, then and now, a ‘death tax’ by some parts of the media and political opponents).

Some MPs on the left of the party have advocated wealth taxes during debates in Parliament, but no Labour spokesperson has provided a clear statement of Labour’s views on an actual levy, whether one-off or recurring, on people’s total assets, as explored by the Wealth Tax Commission. Asked by Andrew Marr: “Are you looking at a wealth tax?” Keir Starmer answered by talking about landlords’ income from letting out property. Rachel Reeves managed to get through the conference without addressing the topic. However Reeves’ 2018 pamphlet, ‘The Everyday Economy’, did touch on wealth taxes (see below).

Property taxes: warning over 2022 ‘council tax bomb’

In addition to scrapping business rates (see earlier section), some Labour figures would like to see council tax replaced. The party is also warning of forthcoming further big increases in council tax.

Speaking at an IPPR fringe event at the conference, Andy Burnham, Mayor of Greater Manchester, called on Labour to scrap council tax (and potentially SDLT too) and replace it with a new levy based on the value of property. This could be a form of Land Value Tax or a Proportional Property Tax (an annual levy worth around 0.5 per cent of the value of a home). But he said they should rename it, suggesting they ‘call it the levelling up tax’.

A proportional property tax has the backing of significant numbers of MPs from across different parties, including Margaret Hodge and John McDonnell (among others) from Labour. IPPR called for such a tax to replace council tax and SDLT shortly before the conference. The think-tank said the move would lead to a fall in house prices of 3% in London and other well-off places in the South, while the most affected areas, primarily in the North East and North West, could see rises of 11 to 15%.

In his conference speech Steve Reed, Labour’s Shadow Secretary of State for Communities and Local Government, attacked “Downing Street’s council tax hikes [which] clobber working families and choke off local spending. And they’re putting local shops out of business with sky high rates that mean they can’t compete with out-of-town online retailers.” He said a Labour government will stop land-banking with a ‘use it or lose it’ law that incentivises developers to build the million unbuilt homes which already have the green light from councils.

In an interview with the Local Government Chronicle during the Conference, Reed said he expects that the government will lift the council tax referendum cap and social care precept, thereby shifting the burden on to local government. He said: “Next April, with the economy still struggling to recover from the pandemic – are they actually going to clobber people with another massive council tax rise, choking off local spending and crushing local economic recoveries, at the same time as introducing a national insurance tax hike? It is remarkable. You would imagine a social care plan would fix social care, but actually there's no money for social care for at least three years and quite possibly ever if they raid funding for the NHS again. Instead, they have primed a council tax bomb to go off next April.”

At a CBI event, Rachel Reeves said the Government needs to change the definition of ‘affordable housing’ so it reflects ‘genuinely affordable’.

Towards net zero – but in a socially just way

There was plenty of talk at the conference about the transition to a green economy, but very little discussion of the role of tax in this process.

Rachel Reeves told the conference that as a ‘Green Chancellor’ she would “invest in good jobs in the green industries of the future: giga-factories to build batteries for electric vehicles; a thriving hydrogen industry; offshore wind with turbines made in Britain; planting trees and building flood defences; keeping homes warm and getting energy bills down; good new jobs in communities throughout Britain.” She committed the next Labour government to an additional £28 billion of capital investment in the UK’s green transition for every year of this decade.

The amount would quadruple the Government’s current capital investment, and Labour said it would hope to attract a matching sum of private investment in green technologies. In total, the party will commit to spending £224 billion on climate measures over the next eight years. Labour said the public spending was justified to prevent costs spiralling further, quoting the Office for Budget Responsibility’s 2021 fiscal risks report, which said delaying significant investment by a decade could double the costs of a green transition.

On Labour’s ‘green new deal’ and the climate crisis, Sir Keir said: “Action is needed. Not in the future, but now. If we delay action by a decade the costs of climate transition will double. This urgency is why Labour will bring forward a ‘green new deal’.” But the Labour frontbench stopped short of backing a ‘socialist Green New Deal’ that includes public ownership of industries including energy, water, transport, mail, telecommunications, which was part of a motion passed by delegates at the conference. (Labour is not bound by policy passed at its annual conference. It is the party’s National Policy Forum and the ‘Clause V’ meeting before an election that decides which parts of the party programme are included in the manifesto.)

IPPR reports often influence Labour policy-makers, and this summer’s report from the thinktank’s Environmental Justice Commission gained attention at the conference. The commission said that carbon pricing (they did not express a preference between emissions trading schemes and taxes) has a role to play in making environmentally damaging behaviours more expensive, and clean activities cheaper through subsidies, but its use must meet a series of fairness tests. On the fringe, Hilary Benn MP, co-chair of the commission, drew on the message of a series of citizens’ juries run by the commission, which was that the cost of climate change must not fall on low and middle-income households. Benn said people must be at the heart of the UK’s rapid transition to net zero, or else it will not succeed.

At the same event Luke Murphy, head of the commission, called for a financial one-stop shop, akin to the government’s Help to Buy scheme, to help households switch to green alternatives on heating, home insulation and transport. Lord Bilimoria, crossbench peer, called for the government to develop a National Delivery Body (NDB) to lead the development and implementation of a national heat decarbonisation strategy.

Shadow Business and Energy Secretary Ed Miliband argued for borrowing to invest in green industries, at a Progressive Economy Forum fringe event. At a separate event, Miliband remarked that ‘our institutions are still too oriented to short-term wealth extraction’, and stressed the ‘fundamental question’ (‘is it going to be fair?’) of how we tackle climate change.

At a Green Alliance fringe event, Tom Sasse of the Institute for Government (IfG) remarked that Chancellor Rishi Sunak has not prioritised a green recovery in any fiscal event or significant financial statement so far.  He also called on Labour to be clearer about what it is going to do, especially on an emissions trading scheme versus a carbon tax. He opined that reaching ‘net zero’ will not work if it is a ‘top down’ approach because you need input from local authorities. He said the IfG is working on a report on taxation and net zero, which will look at current misalignment of taxes in this regard.

Rachel Reeves was asked by CIOT about Labour’s position on carbon pricing and whether the party would seek to strengthen the UK’s emissions trading scheme. She passed on the question, saying it was one for Ed Miliband. Catherine McGuinness from the City of London highlighted an initiative to make London a centre for the voluntary carbon offset market.

At a New Statesman/EY event, Labour’s Shadow Minister for Business and Consumers, Seema Malhotra, said the skills needs of the green economy need to be reflected in the school curriculum.

Employment rights: Labour propose increased worker rights with single enforcement body

Labour set out plans at the conference for an ambitious expansion of employment rights. They would ban zero-hours contracts and put in place a single status of ‘worker’ for all but the genuinely self-employed.

Angela Rayner, Labour’s Deputy Leader, launched a green paper on employment rights on the first day of the conference, saying within the first 100 days of coming to office, Labour would sign into law what it calls its new deal for working people.

Rayner said a Labour government will bring together representatives of workers and employers to negotiate pay and conditions in every sector, through the introduction of Fair Pay Agreements. Collective bargaining in every sector will end the free market free-for-all that encourages undercutting, exploitation, and a race to the bottom, she said.

Other proposals in the paper include:

• The creation of a single status of ‘worker’ for all but the genuinely self-employed so all workers have the same rights and protections, including rights to sick pay, holiday pay, parental leave and protection against unfair dismissal from day one on the job
• The right to flexible working for all workers as a default from day one, alongside the ‘right to switch off’ outside of working hours
• A ban on zero-hours contracts and an end to ‘one-sided flexibility’, with all workers having the right to a regular contract and predictable hours
• Increasing Statutory Sick Pay (SSP) and making it available to all workers, including the self-employed and those on low wages currently excluded by the lower earnings limit for eligibility
• Ending fire and rehire
• Extending statutory parental leave, introducing the right to bereavement leave, strengthening protections for pregnant women, and reforming the Shared Parental Leave system
• Establishing a single enforcement body to enforce workers’ rights, inspect workplaces and bring prosecutions and civil proceedings on behalf of workers against bad employers relating to health and safety, minimum wage, worker exploitation and discriminatory practices
• Introducing mandatory ethnicity pay gap reporting to mirror gender pay gap reporting, and a new requirement on employers to report and eliminate pay gaps through the implementation of action plans to eradicate inequalities in the workplace

TUC General Secretary Frances O'Grady welcomed the announcement, saying: "Giving workers and their unions more power to bargain collectively is the best way to improve pay and working conditions across Britain." At a fringe meeting O’Grady attacked ‘bogus self-employment’, asking: “When you’re in bogus self-employment, who pays for training? You do.”

In his leader’s speech Keir Starmer expressed concern about the 5.7 million people in low-paid and insecure work, saying that the millennial generation, clustered in low-paying sectors, will be the first generation to have lower lifetime earnings than the one which went before. He said this nation will not grow with the low-wages, low-standards and low-productivity of the Tories.

A motion on high street and business recovery motion was carried by the conference. Put forward by Labour Business and trade union Usdaw, it called on the Labour Party to develop a ‘new deal for workers’. This is to be based around a living wage, guaranteed hours, more equal distribution of wealth and economic power, better rights at work for employees and the self-employed, and ‘ending no-rights employment’.

The report of Labour’s National Policy Forum (NPF) tells us that the Labour Party and its affiliate trade unions have established a taskforce to develop Labour’s agenda on workplace rights. The NPF also says that there needs to be a greater emphasis in government on gathering data and evidence by intersecting inequalities and on jobs, health and education inequalities, pay gaps and proper Equality Impact Assessments of government policy.

Supporting low earners: higher minimum wage, more generous universal credit

Labour would change the universal credit taper rate so that people keep more of the money they earn. Labour members and leaders both want to increase the minimum wage, but are at odds over how high it should go.

In his leader’s speech Keir Starmer juxtaposed rent increases, tax increases, the universal credit cut and increases in petrol and domestic energy prices to paint a picture of a cost of living crisis hitting those on low incomes particularly hard. Similar passages appeared in numerous other speeches during the conference.

What would Labour do about it? Shadow Secretary of State for Work and Pensions Jonathan Reynolds told the conference that under Labour’s plans – which includes scrapping the five week wait for universal credit, ending the benefit cap and binning the two child limit – 500,000 fewer people would be in poverty right now. Labour would cancel the cut to universal credit, he added.

Reynolds told the conference that Labour will replace universal credit with ‘a better system’, including changing the taper rate to make sure people keep more of the money they earn. “For many people, work simply doesn’t pay enough… That’s because up to 75% of the extra money they earn is taken away from them through the taper rate, even before travel costs or childcare come into it. Britons on the lowest incomes effectively pay a higher marginal rate of tax than their Prime Minister because of that taper rate. It’s perverse.”

Reynolds said Labour would also replace the current system of work capability assessments with a system that supports people to live the lives they want.

The employment rights green paper (see previous section) commits Labour to an immediate increase of the minimum wage to at least £10 per hour for all workers. However many party members feel this is too low. Conference delegates voted for a motion urging the party to raise the minimum wage to £15 per hour and committing Labour to raising statutory sick pay to a living wage. Delegates had earlier voted for a motion committing the party to raising the wages of all care workers to £15 per hour.

Some of these issues were discussed at a Fabian Society event on household finances. Richard Lane, Director of External Affairs at StepChange, a debt charity, said universal credit is a resilient system that has helped people during the pandemic, but the five-week wait is causing destitution. He called for an overhaul of how tax credit overpayments are handled, and for reform of government debt practices, especially at local government level. Lane also praised the Help to Save scheme (a government scheme which tops up savings of low income earners) but said it needs more publicity.

At this same event, Anneliese Dodds, Labour Party Chair, made a plea not to forget legacy benefits (i.e. the ones being replaced by universal credit, but they are still around). Dodds stressed the importance of dealing with the costs of childcare and with ‘childcare deserts’ (lack of provision in some places). Helen Barnard, Deputy Director of the Joseph Rowntree Foundation, said the level of the minimum wage is only one factor driving income inequality; it is also driven by insecure and precarious work, people working but who want to work more hours, and volatile earnings.

CIOT asked whether the panel thought there could be improvements to how the tax and benefits systems interact. Responding, Dodds praised the work being done by the Institute’s Low Incomes Tax Reform Group. She said HMRC and DWP were not joined up enough. She suggested this was partly about DWP capacity.

Dodds is leading Labour’s policy review, which operates through the National Policy Forum (NPF). In a paper approved by the conference, the NPF indicated a wish to see a child poverty strategy and a strengthened system of social security to tackle in-work poverty alongside enhanced employment rights that provide genuine financial security. They call on Labour to replace universal credit with a fair and compassionate system that offers security for all, and to bring forward a new deal for workers.

Pro-business, pro-reform of business

Labour leaders once again sought to persuade business visitors to the conference of the party’s pro-business credentials. Keir Starmer told them that there had been ‘a complete change of attitude to business’ from Labour under him. Shadow Chancellor Rachel Reeves said in her speech that Labour’s approach was “unapologetically pro-worker and unapologetically pro-business”.

In his conference speech Starmer described small businesses as ‘the next generation wealth creators’. “I want to create the conditions in which inventive small businesses can grow into inventive big businesses,” he told delegates. He announced that Labour would change the priority duty of directors to make the long-term success of the company the main priority, arguing that such a move would have the blessing of British business and that a focus on the long-term would allow for better investments.

A speaker from the Opinium agency presented research of SME views commissioned by SME4Labour. The survey found that perceptions of Labour have improved under Sir Keir Starmer: 47 per cent of business people said the party had changed for the better compared to when Jeremy Corbyn was leader, while only 15 per cent thought it had changed for the worse (the remainder felt that there had not really been a change at all).

However a Conservative government is still favoured by more business people, with those who expressed a preference backing the Conservatives by roughly two to one as both the best party for the economy and the best party for their own business. The top reason business leaders feel the economy would be better under the Conservatives is because they believe that Labour would increase the debt and deficit by spending too much money (41 per cent). Second to this is a belief that the Conservatives care more about the economy while Labour seem to care about other issues (30 per cent), followed by Labour being too close to the trade unions (25 per cent).

The self-employed – calls for improved rights, better support

A shadow minister described support for the self-employed as ‘wholly inadequate’. There is continuing dissatisfaction at levels of support for many of the self-employed affected by the pandemic.

At an SME4Labour and Opinium fringe event that debated whether Labour is the party of self-employed, Labour’s Shadow Exchequer Secretary Abena Oppong-Asare accepted that the self-employed have been ‘massively’ affected by COVID-19 and more needs to be done to support them. She acknowledged that Labour is not always seen as on the side of self-employed people and she wants to extend an ‘olive branch’ to them. She said Labour is on a listening exercise with the self-employed at the conference. Mayor of the West of England Dan Morris complained about the lack of rights for self-employed workers which is a concern because the ability to work from home may lead to more self-employed people.

There was widespread dissatisfaction at the way some of the self-employed have been treated in the distribution of COVID-19 economic help, at an IPSE/SME4Labour fringe event. Millions have been unable to claim grants under the Self Employment Income Support Scheme (SEISS). They include company directors, people who did not file a 2018-19 tax return because they had just started working for themselves when the pandemic struck, or those who earned more than £50,000 or less than half their income from self-employment.

Bill Esterson MP, who is also Shadow Minister for International Trade, said there is ‘no excuse’ for not getting income support for newly self-employed people, and that sick pay and self-isolation payments are ‘wholly inadequate’. He suspects the Treasury wanted to save money during the pandemic and chose excluding the self-employed to pay for it. He wondered if something can be done with deferring VAT to avoid bankruptcies this year?

Tristan Grove of IPSE claimed one million freelancers have been driven into debt by the pandemic because of a lack of help from government. Sonali Joshi, founder of Excluded UK, said the impact on people of exclusion from COVID-19 financial help is only now being seen, such as mounting debt, mental health crisis and people losing homes – and the tax payments in January and July based on trading periods before the pandemic were a ‘bitter pill’ for the self-employed to swallow when they were excluded from government covid support. Rebecca Seeley Harris, an employment and tax consultant, said she had made a couple of proposals to the government on how to help the excluded self-employed during the pandemic but found that the ‘political will was not there’.

Uber workers are self-employed for tax purposes but ‘workers’ in terms of employment status. At a Fabian Society fringe event on the future of the gig economy two select committee chairs, Yvette Cooper (home affairs) and Stephen Timms (work and pensions) praised the GMB and Uber (represented at the event by their UK boss Jamie Heywood) for their agreement in May that Uber would formally recognised GMB, which will now be able to represent up to 70,000 Uber drivers across the UK. Drivers will retain the freedom to choose if, when and where they drive whilst also having the choice to be represented by GMB. After the event, Heywood told CIOT that the success of the agreement will be judged if other operators follow suit (Uber is the only major private hire operator to offer these protections, and no other operator has followed this move so far) but says the success of the agreement will be measured also by the happiness of the Uber ‘workforce’.

At the same event Yvette Cooper spoke about her two-year Commission on Workers and Tech examining British workers' hopes and fears for automation over the next decade. Among her findings is that technology is changing most people’s jobs but workers are not getting a say when this happens. (A similar point was made by a speaker from the trade union ‘Community’ at a different event.) Reeves said that technology change risks worsening inequality and suggested that politicians, trade unions and business leaders must do more to prepare workers for change.

The Everyday Economy

Rachel Reeves’ conference speech was built around the theme of the value of the ‘everyday economy’, a phrase she used nine times in the speech. The everyday economy includes high street businesses, public services and carers, among others, according to Reeves.

Reeves said that the everyday economy is made up of people who keep Britain going and forms the beating heart of our economy even if too often that work is hidden from sight. The Conservative government not only doesn’t care about the everyday economy but doesn’t even understand how it works, she charged. “[O]ur national economy does well when the everyday economy is thriving… because money that goes into the pockets of working people is money spent in shops, cafes and restaurants, creating growth and bringing shared prosperity.”

The origin of the phrase ‘everyday economy’ seems to be a pamphlet of that title published by Reeves in 2018. While the pamphlet is not a policy manifesto it did suggest a number of ways forward which may offer a clue as to Reeves’ personal views, including, in the area of fiscal policy, the following ‘reform strategies’ which she thought could together raise over £20 billion per year of tax revenues:

• A radical overhaul of the tax system “because our current system of wealth taxation isn’t working”. She suggested innovations like automatic information exchange and country-by-country reporting were opening up new possibilities for taxing high levels of wealth in a globalised world
• Re-evaluation and revision of council tax bands – and considering the case for its replacement with a property tax, levied on property owners
• Inheritance tax “needs to be either reset or shifted wholesale to a tax on the receipt of any gifts throughout a lifetime, making tax on all gifts equal and thus avoidance more difficult”
• A land tax could help raise tax more fairly from the 0.6 per cent of the population who own 69 per cent of the 60 million acres that make up the UK
• Taxing the savings and investment income of higher rate taxpayers can be increased
• Capital gains tax could be reformed, halving the annual allowance, having it paid at income tax rates and improving tax compliance
• Higher rate pensions contribution reliefs could be restricted and legislation could require that 20 per cent of all pension contributions be invested in employment-creating opportunities in exchange for the tax reliefs currently available to pension funds

Conference News in Brief

Keir Starmer said in his speech that Labour would make the UK a leader in science and R&D, committing to invest a minimum of 3% of GDP.

At a fringe event an AAT representative asked about regulation of the tax advice market, saying we should require all advisers to be members of relevant professional bodies. Darren Jones, Chair of the BEIS select committee, said he had not known that large numbers of advisers are not, adding that it was ‘very useful’ information. He said he would think about this.

A ‘community wealth building’ composite motion put forward by trade unions CWU and ASLEF was carried. ‘Community wealth building’ is an approach to place development that maximises economic opportunities and ensures wealth is gained  by local people, businesses and communities. The motion saw conference resolve to adopt community wealth building as the ‘main approach to local economic development across the UK by ensuring more of our economy is democratically and socially owned’.

Labour’s National Policy Forum believes trade is vital to the UK’s future prosperity but complains that the government has ignored the needs of business and workers in negotiations as it looks for political ‘quick wins’. The NPF commits Labour to stand up for business and workers in trade negotiations, with initial proposals to improve the deal with the EU to ease red tape.

At a Resolution Foundation Q&A, Rachel Reeves reflected that public trust in Labour’s economic policies is still a struggle because the party is (unfairly in her view) perceived to have been responsible in part for the global financial crisis of 2007/8. Labour wants to find a way to break that narrative, she said.

Angela Rayner said that, as minister for procurement, she would not sign off a single penny that goes to a company that exploits its workers or does not pay its taxes.

Tony Danker, Director General of the CBI, expressed concern about labour shortages across the country. He also argued: “We should tax incentivize businesses that invest rather than businesses that don’t.”

Andy Burnham, Mayor of Greater Manchester, said the decline of the high street has been going on for a long time and it is tertiary towns that are really struggling. He said the pandemic and mass working from home has led to a groundswell of concern. But we must accept that high streets will not be the same retail centres that they were. We need to take away redundant space and make residential places, he suggested.

Rachel Reeves said Labour will create a new, independent Office for Value for Money, to keep a watchful eye on how public money is spent and equipped with meaningful powers so no government is allowed to mark its own homework.

Angela Eagle observed that Boris Johnson’s government has abandoned the ‘neo-Margaret Thatcher’ low tax approach. This means the next General Election will be a battle of values between Labour and the Conservatives, she thought, saying that Labour will need to go back to explaining the values behind any tax changes it suggests.

At a Labour Digital fringe event, Darren Jones MP (Chair of the BEIS select committee and of Labour Digital) said the issue of skills is fragmented between numerous govt depts. This is problematic, he said.

By Hamant Verma, Senior External Relations Officer at CIOT (with additional reporting by George Crozier)