The Labour Party outlined plans for widespread nationalisation, higher public spending and taxes, and greening the economy, at its 2019 Conference in Brighton. In general, the conference took place in a highly charged and occasionally chaotic atmosphere dominated by Brexit, with the party’ leader’s speech moved to an earlier day and truncated to fit in with the unanticipated return of Parliament.
Tax policy development
Tax had a relatively low profile at the conference (beyond the CIOT/IFS/IfG fringe debate and one or two other gallant attempts on the fringe), and there are few signs of detailed policy development in this area. The manifesto for the 2017 general election is still a good guide to Labour tax policy, and the policies this set out on both personal and business taxation were reaffirmed by spokespeople during the week (see below).
Personal taxation – no tax hikes for the 95 per cent
Labour has reaffirmed its plans to raise income tax for those earning more than £80,000. Specifically, under Labour’s proposals (which date from the 2017 manifesto), there would be a 45% rate of tax on earnings between £80,000 and £123,000, and a 50% rate on earnings over £123,000. Labour claims that 95% of people in employment would not see an increase in income tax or national insurance contributions.
Anneliese Dodds described this policy as reversing the Conservative income tax cut for the best off (ie reversing the cut of the 50p rate to 45p). She said this had been an important Labour policy at the last election. At the same fringe meeting James Meadway, a Labour economic adviser, expressed strongly the view that Labour should not start advocating tax increases for people with earnings of less than £80,000 a year. Saying ‘the first thing we’ll do is whack up your taxes’ is not a winning electoral strategy, he argued. By contrast, the message that 95% of people (ie all by the highest earning 5%) will not see an increase in income tax or national insurance – or indeed standard rate VAT - had been effective in 2017 and would be effective again in the future, he maintained.
Labour is extremely critical of the proposal from new Prime Minister Boris Johnson to raise the threshold for the top rate of income tax from £50,000 to £80,000. Shadow Chancellor John McDonnell said the proposal would “rip out £10 to £20 billion a year from our already decimated public services… and put those billions into the pockets of the rich. This Government cannot be trusted with our public services – only a Labour Government will end austerity and establish a fair tax system that serves the many, not the few.”
Non-dom status to be abolished
The biggest tax-related announcement around conference time was made the previous week. Ahead of the conference, John McDonnell said that if Labour enters government he would abolish non-dom status in his first Budget. Labour will consult on whether they should make an exception for foreign residents who live in the UK only for a short period of time. It is, he says, a ‘spurious scam’, adding that the present system ‘offended ordinary people’. He told The Times newspaper: “What we’re saying is [we want a] fair taxation system, everyone should pay the same amount and everyone should be treated the same. Using dodges, like the non-dom status, has offended ordinary people… Why should the super-rich get away with it on a spurious scam like this?” This policy was not repeated in his speech to conference, however.
Inheritance tax and other wealth taxation
There were no announcements in this area but plenty of debate. Torsten Bell, director of the increasing influential Resolution Foundation, and a former Head of Policy for Labour, told a fringe meeting that wealth has become “a much bigger deal” in Britain. Rachel Reeves, Chair of Parliament’s Business select committee, praised the Resolution Foundation and others for trying to move the debate from taxing income to taxing wealth. In particular she said there was ‘a huge amount we can do’ on inheritance tax. Taxing on the basis of the recipient worried her, however, as it could lead to less tax being paid. She thought a lifetime gifts tax, paid by the recipient, would be “a move in the right direction”. This is one of a number of policies in this area advocated by the IPPR (see below).
At the same event shadow financial secretary Anneliese Dodds was more cautious, observing that IHT is effectively paid by the recipient anyway. At a separate event former party leader Ed Miliband said wealth was something we’ve ignored for too long. He said that many people voted to leave the EU in 2016 because ‘they wanted a new beginning’, some of which can be explained by rising wealth inequality.
Business tax – corporation tax increases still planned
Labour reiterated policy to increase corporation tax for most businesses during a number of fringe events. The party plans to increase CT from 19 per cent to 26 per cent, restoring it to its 2011 level.
Speaking at a fringe event organised by the Federation of Small Businesses (FSB), Rachel Reeves, chairman of the Parliamentary business select committee, said the Government’s priority has been cutting corporation tax for corporates, while ignoring small businesses. Reeves said: “I would like to see the priority of business taxation to help smaller businesses and start-up businesses, rather than cutting corporation tax, which benefits larger businesses,” Reeves said.
At a Fixing Finance/Labour fringe meeting, John McDonnell spoke of his enthusiasm for a Financial Transaction Tax (‘Robin Hood Tax’), adding that It will be ‘sand in the wheels’ to slow down things slightly on the trading floor. He expects a Robin Hood Tax to raise £35 billion to invest in public services such as free adult care. McDonnell said Labour is pushing for tax on foreign exchange.
Reviewing local taxation
Shadow Financial Secretary Anneliese Dodds told a fringe meeting Labour would review council tax and business rates. This repeats a commitment in the 2017 manifesto that “We will initiate a review into reforming council tax and business rates and consider new options such as a land value tax, to ensure local government has sustainable funding for the long term.”
However Shadow Chief Secretary to the Treasury Peter Dowd, speaking in a debate organised by CIOT alongside the Institute for Fiscal Studies and Institute for Government, cautioned against radical change to council tax, saying that £35 billion comes from it. A local income tax, mooted by an audience member, was a thorny issue for him because the UK is so regionally imbalanced.
Bill Esterson, Shadow Minister for Small Business, speaking at a roundtable discussion, reaffirmed Labour’s policy of abolishing ‘double rating’ in business rates, and indicated that they were keen to go further with business rate reform. Among other things the party favours more regular valuations.
‘Saving the high street’
At a USDAW fringe, Labour MP Liz Twist called for a ‘retail sector deal’ to save the high street, shopping malls and secure jobs in retail, especially for women. The MP said high streets are about community and bringing people together, so must be maintained. At the event, councillor Nick Forbes CBE – Labour Group Leader on the Local Government Association – called for an online retail tax because ‘we need to get their money into town centres’, rather than watch their money leave the country.
Shadow Chancellor John McDonnell said that for the past 18 months, every other Saturday, the shadow Treasury team is visiting towns to talk to local people about the local economy – and every town has called for reform of business rates. He suggested that empty shops should forcibly be put back into use after 12 months. He argued that a levy on overseas companies owning property in the UK will help restore the high street. He spoke positively about Labour’s relationship with the Federation of Small Businesses (FSB).
At another FSB session, Rachel Reeves, Chair of Business, Energy and Industrial Strategy Committee, said while corporation tax rates have gone down the burden of business rates continue which especially effect start-ups. She said large companies are not paying their fair share of taxes, saying it makes her especially angry that HMRC seem to go after low hanging fruit SMEs rather than big and multi-national companies. She told the CIOT that MPs are frustrated when the heads of large and multinational companies fail to appear in person in front of committees, even though this has not affected her committee, but little can be done about it at the moment. Often they send a communications person who cannot answer many MPs’ questions, she lamented.
Shadow small business minister Bill Esterson said online sales taxes surely have a role in the future tax system, in order to ‘level the playing field’.
Tax reliefs – ripe for review
At the CIOT/IFS/IfG fringe event, Shadow Chief Secretary to Treasury Peter Dowd focused his fire on tax reliefs, claiming there is £450 billion of tax reliefs in the UK which could be used in a different way. He contrasted the abundance of tax reliefs to the ‘one in, three out’ rule that was a commitment undertaken by the previous government (2015 – 2017) to remove three pieces of regulation for every new piece brought in.
Tax compliance – an inquiry into evasion and avoidance
Peter Dowd called for international action on tax evasion and avoidance at a New Statesman and CAGE (Competitive Advantage in the Global Economy) fringe event, Dowd said once in government the party would launch a public enquiry into tax evasion and avoidance and ‘open the system up’, obliging ‘anyone earning more than £1 million a year’ to ‘make their tax returns public’. “We live in a globalised world whether we like it or not,” said Dowd, “so we need to challenge people and companies on that level, on that world scale. It’s difficult with people like [US President] Trump, who almost encourages evasion, and doesn’t think it’s a problem.”
At the same event Professor Arun Advani from CAGE highlighted his work studying the financial benefits of random audits of self-assessment taxpayers, pointing out that over 80 per cent brought in money. “Six per cent of revenue that is supposed to come in never arrives, according to HMRC’s figures,” Advani told the audience, which equates to around £35 billion in lost revenue. “One in six pounds amongst self-assessment payers doesn’t come in because one in three self-assessors are under-reporting. We’ve cut the number of audits since the mid-2000s but they’re extremely good value, because there’s a tiny fraction, a small minority of the self-employed who owe a vast majority of the money.” After the event, Advani told the CIOT that he is working on a project that will explore data and draw conclusions on the relationship between people who underpay tax and their agents, such as tax advisers. The professor hopes to uncover which under payers use which agents, in part to see if HMRC intervention on clients of an agent in the past has led to a change of behaviour among agents.
Cathy Cross, parliamentary officer at the Public and Commercial Services Union, questioned the accuracy of the £35 billion figure for revenue lost through evasion, pointing out that what she considered a low estimate didn’t include money lost through practices such as offshoring. Once widespread corporate tax management is taken into account, the lost tax numbers are ‘closer to £110bn a year’, Cross said.
Labour’s 2017 tax transparency and enforcement programme (TTEP) remains policy, including such measures as:
- Closing the ‘Mayfair Tax’ loophole used to reduce income tax liabilities on equity fund managers (c. £0.7 billion per annum)
- Closing the Eurobond loophole that enables securities listed on the Channel Island Stock Exchange to enjoy exemptions from withholding tax)
- Clamping down on umbrella agencies used by temporary employment agencies to ‘significantly’ reduce tax liabilities
- Investigating and clamping down on the use of Advanced Thin Capitalisation Agreements (ACTA’s) used by large, multi-group companies to reduce their tax liabilities
- Prevent tax avoiders accessing public sector contracts
- A General Anti-Avoidance Rule to replace the General Anti-Abuse Rule
More on TTEP here.
Anneliese Dodds said Labour would continue to be resolute in facing up to the problems of profit shifting and tax avoidance. She acknowledged the progress made by the current government which she said had adopted much of what Labour was advocating in this area, but more robust action is needed, she maintained, much of it international. Specifically she criticised the UK government for not being strong enough on measures to capture the value created in the UK that contributes to the profits of multinational companies.
Praising Anneliese Dodds during his keynote speech to the conference, John McDonnell said that the shadow financial secretary had “found the magic money tree - it’s in the Cayman Islands and she’s digging it up and bringing it here.”
Greater transparency – home and abroad
Anneliese Dodds promised a fringe meeting that Labour would continue to support greater transparency on tax. Labour adviser James Meadway advocated publicly searchable tax returns, at least for the wealthy, as a mechanism to increase public trust in the tax system.
Elsewhere, Shadow Chancellor John McDonnell told a fringe meeting about his ‘shareholder campaign’ to demand companies sign up to the Fair Tax Mark standards, to demonstrate transparently that they pay their fair share of taxes. He said numerous institutions from churches to trade unions and pension funds have large scale shareholdings in many of the companies that avoid taxes – the inference being that they can be choosier about their investments.
TTEP transparency measures include
Public filing of tax returns for all large companies with Companies House
Introduce strict minimum standards for Crown Dependencies and Overseas Territories, including a public register of owners, directors, major shareholders and beneficial owners, in addition to a requirement for companies and limited liability partnerships to publish accounts
Non-traditional employment structures – a sectoral approach for freelancers?
The challenges of non-traditional employment structures and the threat they present to both workers’ rights and the Exchequer’s tax take were once again prominent on the conference fringe. Bill Esterson, shadow small business minister, said if you are self-employed you are taking bigger risks. He said IR35 implementation had been ‘enormously problematic’. Anneliese Dodds has called for a proper review and rethink on public sector IR35 extension implementation, he said.
The party affiliate group Labour Business launched a paper at the conference titled ‘Off payroll regulations (freelancing): The mess we are in and how to get out of it’. This recommends that self-employment and the use of Limited Liability companies (also known as Personal Service Companies or PSCs) be considered on sectorial basis as well as across the whole economy. Specifically the paper proposes:
- A new business model for freelancers (Freelancers’ Limited Company (FLC)) and amending guidance on IR35 to take into account its use
- Revising guidelines on key tenets of self-employment by industry sector, such as substitution, MOO and others
- Licensing use of a FLC by industry sectors allowing third parties like Trade Unions and Trade Association to be accrediting organisations
- Defining a 4-year window for review of Freelancing policy and use of the FLC. Review effectiveness around the issues of tax revenue; flexibility and prosperity add employment rights. To be considered on sectorial basis.
Labour Business also want government to:
- Make HMRC a ministerial department and formally appoint a Minister for HMRC
- Suspend new IR35 roll-out to private and public sector, keep liability with the freelancer. Only move forward when considering results of Taylor review.
- Retain the IR35 forum, but with an independent chair
- Revise the CEST tool for establishing employment status by sector. CEST tool to use agreed precedents and cases and rules. To be agreed by the IR35 Forum as a governing body.
- Review role of umbrella and payroll companies for employment rights and tax purposes and as vehicles that create bogus or forced self-employment. Also encourage use of co-operative models.
Responding to the paper Bill Esterson said praised the quality of Labour Business’s work and said that the Treasury team, and Anneliese Dodds in particular, would consider the proposals. He agreed that we need a ‘sector by sector’ approach as advocated by Labour Business.
At a IPSE/New Economics Foundation fringe, Rachel Reeves, Chair of Business, Energy and Industrial Strategy Committee, suggested that pensions auto enrolment should be rolled out to the self-employed in some instances. She said that no legislation arising from the Taylor Review is a ‘disgrace’. She insisted choice is fine but bogus self-employment is the problem. At a separate NEF event Ed Miliband said he was in favour of auto-enrolment in trades unions, and if it was going to start with a single sector, what about the gig economy?
One attendee at a roundtable reported that France is looking at a charter of things that companies that provide a platform to workers can do to support the workers without making them employees.
Labour’s economic vision – overview
At a speech at a New Economics Foundation (NEF) event at the conference Shadow Chancellor John McDonnell identified three “foundation stones” of Labour economic policy. Two of these, an effective safety net (including ending in-work poverty) and universal basic services were also at the centre of his keynote conference speech. The third – ‘structural change in our economy’ – was not developed further at this conference, but includes measures launched at last year’s conference and in the 2017 election manifesto. McDonnell paid tribute to NEF for having generated some of the ideas he was putting forward (see NEF section below).
First foundation stone - an effective safety net – ending in-work poverty
In his keynote speech to the conference, John McDonnell accused the Conservatives of breaking the link between work and escaping poverty and made the commitment that “within our first term of office Labour will end in-work poverty”. Central to this commitment are measures to raise wages through a ‘Real Living Wage’ of at least £10 per hour and the rolling out of collective bargaining to “enable workers to get their fair share of what they produce”. He also pledged to restore full trade union rights and workplace rights, and cap rents.
McDonnell also promised to “end the barbaric roll-out of universal credit”. Days after the conference this commitment was strengthened to a promise that a future Labour government would scrap universal credit, an announcement made by Jeremy Corbyn at a rally in London.
Scrapping universal credit – or just reforming it?
So Labour are committed to scrapping universal credit (UC)? But what would they put in its place, and how different would it be from the Conservative plans?
First of all, the critique. In his speech announcing that UC would go, Corbyn called it ‘inhumane’ and an ‘unmitigated disaster’. One the conference fringe, Shadow Work and Pensions Secretary Margaret Greenwood said UC rollout had led to rent arrears and food banks. She claimed that people are turning down jobs because they cannot afford childcare, and contrasted cuts to working age welfare benefits with the Government’s ‘Triple Lock’ for pensions.
In the short-term a Labour government would introduce an ‘emergency package of reforms’ to UC including ending capability for work assessment tests, scrapping the two-child limit, dropping the benefit cap, scrapping the ‘digital only’ requirement of UC and suspending sanctions whereby a claimant's support can be reduced if they miss appointments. The ‘pernicious five week wait’ to start receiving UC will go, fortnightly payments will be introduced, payments will be made directly to landlords and women will be protected by making split payments by default, Corbyn announced.
The longer-term plan for replacing UC is less clear. The motion calling for UC to be scrapped, which had been passed by the conference, referred only to replacing it with a ‘progressive benefit system’. There does not appear to be any commitment to return to a series of disaggregated benefits, though neither has this been ruled out. Labour’s Policy Commission which looked at this area reported “that Universal Credit is now so synonymous with cuts and hardship that the brand itself has become 'toxic'." But while it recommended many of the short-term changes listed above it did not set out what UC might ultimately be transformed into. It appears that Labour’s plans in this area are still in formation.
Beyond universal credit, there are still plenty of advocates for a universal basic income (UBI) at the conference, but few in a position of influence. Labour MP Karen Buck was probably speaking for many when she warned Labour members at a fringe meeting not to get distracted by UBI which, she said, will not solve many of the problems of child, pensioner and in-work poverty and disability support.
Second foundation stone - Universal Basic Services
John McDonnell unveiled Labour’s Universal Basic Services – The Right to a Good Life report at the conference, promising to expand public services free at the point of use including social care and post-school education. This is not directly a tax proposal though it of course implies higher levels of overall taxation to fund these plans.
In his main conference speech John McDonnell explained: “As socialists we believe that people have the right to education, health, a home in a decent safe environment and, yes, access to culture and recreation. And I fervently believe the right to dignity in retirement is a part of that right to health and well being at any stage of life.” The report argues that state provision can be more efficient than having lots of fragmented private providers, that support for market-based provision of services has made it harder to guarantee universal provision, and that collectively provided universal public services create shared experiences that bring us together as a society. The campaign for universal basic services has always been part of a bigger struggle between labour and capital, it concludes.
Labour’s big policy announcement in this area at Brighton was universal free personal care for the elderly (over 65 years-old) in England – a new National Care Service. Currently, state help with the cost of home or residential help is available for those with assets below £23,250. In his speech to conference John McDonnell said the move would be funded out of general taxation.
Other Labour policies in this area include:
- Abolishing all NHS prescription charges (new pledge in Brighton)
- Free, universal childcare for all 2, 3 and 4-year-olds
- Ending tuition fees for university students in England, and making further education free at the point of use
- Free local transport for under-25s
- Universal free school meals for primary school children
- Providing the funding to enable local government to restore free-to-use services lost over recent years including libraries, parks and other amenities
Third foundation stone - structural change in our economy
Policy in this area was not particularly developed in Brighton. There appear to be three broad elements to this strand of Labour thinking. First and foremost this is about rehabilitating public ownership, including Labour’s plans, first launched in 2017, for nationalising rail, mail, water and energy firms. Second it is about inclusive ownership – most notably Labour’s policy, announced a year ago, of legislating for large companies to transfer 10 per cent of their shares into an ‘Inclusive Ownership Fund’ where they would be held and managed collectively by the workers. (Some have called this a ‘hidden tax rise’ because the Exchequer would take the remainder of the fund over a sum of £500 per employee.) Third it covers wider issues around empowering workers including, in large companies, a third of directors being elected by workers, as well as stronger rights for unions and individual workers.
Some of these issues were explored at a Social Enterprise UK/Co-operative party fringe. Matt Lawrence, of Common Wealth, said companies need to be ‘rewired’ so workers have a say, adding that Labour cannot leave it up to the Co-operative and social enterprise sector to reform the economy. Andrew O’Brien, External Relations Director for Social Enterprise UK, said Labour must reset the tax system, so it rewards businesses with a social or environmental purpose. Shadow Treasury Minister Anneliese Dodds said it is Labour policy to promote the role of co-operatives and social enterprises in the economy, and spoke up for the party’s inclusive ownership plan and aim to ‘catalyse the role of employees in business’.
Working time – fewer hours but not zero hours
Working hours were a key focus for John McDonnell in his keynote speech. The shadow chancellor told the conference millions are exhausted from overwork while there are too many others who cannot get the working hours they need. He vowed to ban zero hour contracts to make sure every employee has a guaranteed number of hours a week.
McDonnell also announced that Labour will reduce average full-time hours to 32 a week within the next decade. A shorter working week with no loss of pay, he promised. This reflects research by the NEF that winning shorter working hours without a loss in pay offers a way to tackle symptoms of overwork, providing people with more time to recuperate, participate in democratic process and fulfil caring responsibilities. NEF complain that far more attention has been paid to possible supply-side causes of the productivity puzzle (the conditions under which goods and services are created and delivered), compared with demand-side explanations (the conditions that determine the level and nature of consumption). NEF research finds that treating ‘time’ as a fundamental focus for macroeconomic policy may be part of the solution. A policy package that gradually reduces time spent working while still maintaining aggregate pay overall will raise expectations of future demand growth through two mechanisms, they argue.
McDonnell also said Labour will end the opt-out from the European Working Time Directive and require working hours to be included in the legally binding sectoral agreements, that ‘will allow unions and employers to decide together how best to reduce hours for their sector’. A Working Time Commission with the power to recommend to government on increasing statutory leave entitlements as quickly as possible without increasing unemployment.
Driving Labour policy (1) – The Treasury team
Shadow Chancellor John McDonnell continues to be the dominant figure in Labour’s economic policymaking. While there are occasional tensions between McDonnell and Jeremy Corbyn over issues including Brexit and anti-semitism it appears that McDonnell is generally trusted by his party leader to set the direction and messages on tax and economic policy. Labour-watchers report that McDonnell – notwithstanding his radical approach on public ownership and elsewhere – is actually the marginally more pragmatic of the two, more cautious about, for example, not threatening middle-earners with tax increases, seeing this as a price that must be paid to get Labour into power. Key policy personnel in McDonnell’s office include Rory MacQueen and Max Harris, both praised by McDonnell at a fringe meeting for their work as his economic advisers.
While deferring to McDonnell on the big picture, other MPs on the Treasury team do play significant roles in relation to their areas of responsibility. Peter Dowd, as shadow chief secretary, is a member of the shadow cabinet and a key player in tax policy as well as spending priorities. Anneliese Dodds, shadow financial secretary, only entered parliament in 2017 (she was previously an MEP), and while she has a more low-key approach than Dowd and McDonnell (with fewer rhetorical flourishes) is already a trusted media performer respected for her willingness to engage with the technical detail of tax policy, both in Parliament and with stakeholders. Whether she will really be able to bring a ‘magic money tree’ to the UK (see above) as McDonnell suggests remains to be seen however. Jonathan Reynolds, shadow economic secretary, occasionally strays onto tax policy where it relates to financial services, but mostly focuses on the impact of Brexit on the City at present. Clive Lewis leads on environmental issues within the team. Lyn Brown’s focus is equality and social justice issues. Thelma Walker is McDonnell’s PPS (parliamentary private secretary), praised in his conference speech for “bring[ing] her skills as a former ex headteacher to ensure we all do our homework and deliver.”
Driving Labour policy (2) – NEF
However, the place where most Labour economic policy is gestating is not Parliament but the think tanks of the left, most notably the New Economics Foundation (NEF) and the Institute for Public Policy Research (IPPR).
At an NEF event at the conference John McDonnell said that he believed that the ‘intellectual architecture’ was now in place to enable Labour and its allies to ‘hegemonise the economic debate’ as the Tories did in the late 70s and early 80s. The NEF was, he said, key to that. Essentially it appears that McDonnell sees the IPPR and NEF (in particular) playing the same role in equipping a Corbyn/McDonnell government with policy ideas and making the case for them that the Centre for Policy Studies, Institute for Economic Affairs and others played in relation to Margaret Thatcher’s administration.
The NEF’s current campaign is ‘Let’s Change the Rules’. Their narrative is that the economy is run by and in the interests of corporate elites and the rules need rewriting so it works for everyone. What does this mean in practice? In an article in the NEF’s magazine, chief executive Miatta Fahnbulleh identifies four key elements of what she calls ‘an agenda for national renewal’. These are:
(1) A Green New Deal in response to the climate emergency (see environment section below)
(2) A new social contract starting with a better deal for workers to tackle sluggish wages and the power imbalance in the jobs market (including Employee Ownership Funds)
(3) Pushing power down to people and communities (in practice mostly devolution to regional and local government)
(4) A new deal with businesses – with social value taking primacy over shareholder value
Tax is not central to this agenda – spending programmes and regulation are more significant – but it does have a number of tax implications. In particular the new social contract envisages the replacement of the income tax personal allowance with a weekly cash payment of £48 a week for all adults earning under £125,000 a year, and use of ‘the levers of the state’, including corporation tax, to incentivise businesses to reward their workers fairly. Taxation is also seen as having a role alongside legislation and regulation in incentivising ‘all businesses to operate in ways that the best businesses already do’. The decentralisation proposals include ‘devolution of certain taxes’ but as yet these appear to be undefined. NEF also believe there is room for more borrowing by government. Fahnbulleh told a fringe meeting that borrowing too little was as irresponsible as borrowing too much, and has written that government should direct ‘newly created money’ into green finance.
Driving Labour policy (3) – IPPR
While NEF are probably currently the pre-eminent purveyor of economic vision (and slogans) to the Labour leadership the IPPR continue to lead on detailed tax policy. A year ago John McDonnell called the then recently published IPPR report, ‘Prosperity and Justice: A Plan for the New Economy’, ‘magnificent’, ‘unchallengeable’ and likened it to the Beveridge report. Anneliese Dodds acknowledged to a fringe meeting this year that Labour was “not quite there yet” on tax policy but said they were looking at proposals “from groups like the IPPR”.
So what did that report say? Well, the full report weighs in at 338 pages, but the key tax points include:
- Combining the rates and allowances for employee NICs and income tax into a single tax schedule, and applying them to all incomes on an individual, annual basis, while replacing the present system of marginal tax bands with a formula-based system, applying a gradually rising marginal rate of tax as incomes rise
- Abolishing capital gains tax and the separate rates of tax on dividends, and incorporating income from dividends and capital gains into the income tax schedule
- Replacing inheritance tax with a lifetime gifts tax levied on the recipient, with a lifetime allowance of around £125,000
- Replacing business rates with a land value tax on all non-residential land, calculated on the basis of the land’s ‘optimum use’ under existing planning permission, not its current use
- Increasing corporation tax to 24 per cent, while simplifying the system of reliefs and allowances to increase the tax base
- Introducing an Alternative Minimum Corporation Tax (AMCT) as a ‘backstop tax’ levied on multinational corporations which consistently report low profits in the UK and are unable to show these are genuine. It would be levied on the company’s UK sales at a rate derived from its global profits relative to global sales
- The phasing down and eventual abolition of R&D tax credits other than for SME firms younger than seven years old, and the phasing down and abolition of the patent box. The money released should be channelled into direct funding for innovation through Innovate UK and the National Investment Bank
Driving Labour policy (4) – Momentum
Admired for its organisational skills, feared for its power and hated by those who think Labour has gone too far to the left, the internal party campaign group Momentum is hard to ignore. There is little evidence it is generating its own fiscal policy separate from the think tanks and policy groups its members participate in, but its backing is a key factor in deciding what makes it into Labour policy. The prominent Labour website Labour List reported that Momentum had a 100 per cent success rate on the conference floor with its motions this year, which included backing the Green New Deal and private schools motions.
On its website Momentum sets out its key economic aim to “Redistribute wealth to properly fund public services and infrastructure”, stating: “Britain’s foundations currently rest on structural inequality and injustice. The wealthy don’t pay their dues and corporations avoid paying taxes, whilst ordinary taxpayers subsidise criminally low wages through the benefits system. Momentum backs Labour’s vision to redistribute wealth and power away from the few and to the many, through closing tax loopholes and increasing taxation among the country’s highest paid.”
Environment – a Green New Deal?
Party members voted on the Tuesday of the conference to back a motion by the campaign group ‘Labour for a Green New Deal’ to set a fixed date to achieve net zero carbon emissions by 2030, as well as nationalising the big six energy firms and guarantee green jobs. Labour’s Socialist Green New Deal commits to “work towards a path to net zero carbon emissions by 2030”. Leading Labour spokespeople backed the motion, though John McDonnell, speaking before the vote, said the advice he had received was that net zero by 2030 was not achievable, however desirable it was. During the compositing process, the target for the motion stayed at 2030 but was changed from “zero” to “net zero”, in a bid to secure more support from trade unions.
How would Labour achieve this extremely ambitious target? According to a Labour spokesperson quoted after the vote, “Conference agreed that these should be achieved through massive investment in infrastructure and skills, public ownership of key utilities and supporting climate transition in the global south.” The motion states that the cost of decarbonisation would be “borne by the wealthiest through progressive taxation, not working people and their families”. Shadow Business Secretary Rebecca Long Bailey set out plans in her conference speech for a Green Industrial Revolution. Among a long list of measures she proposed reducing the cost of going electric with a waiver on the excise duty surcharge and providing certainty on company car tax; exempting new investment in plant and machinery from business rates and bringing R&D investment in the automotive sector in line with competitors, making £500 million available for new automotive technologies.
At a Bloomberg-sponsored briefing, John McDonnell suggested that Labour will use tax reliefs to promote green taxes as part of a ‘carrot and stick’ approach to business on this issue. He said tax reliefs are a key tool to incentivise green policies.
Private schools to lose charitable status – and maybe their existence
Labour delegates voted to integrate all private schools into the state sector via a three stage process: withdrawal of charitable status and all other public subsidies and tax privileges; ensuring universities admit the same proportion of private school students as in the wider population; redistribution of endowments, investments and properties held by private schools. Shadow Education Secretary Angela Rayner said “our very first budget will immediately close the tax loopholes used by elite private schools.”
However there is doubt over whether the full commitment will appear in Labour’s next manifesto. Jeremy Corbyn has said he will prioritise the tax/charitable status aspect, not land ownership.
Brexit – a public vote, but would Labour take sides?
A hard fought motion passed by the conference commits a future Labour government to a public vote on any Brexit deal but, in a victory for the leadership, not to a pro-Remain stance now. The party would hold a one-day special conference following the election of a Labour government to decide how to campaign in the referendum.
Delegates approved the proposal favoured by Jeremy Corbyn, which will see the party wait until after the election of a Labour government to decide its position in a fresh EU referendum. Unite, GMB and Momentum backed the leadership line on Brexit, whereas Unison came out in favour of the ‘Remain now’ stance – joining the local Labour parties that put forward pro-Remain motions and various campaign groups.
Aside from that drama, Shadow Business Secretary Rebecca Long Bailey said the ‘right-wing free market Brexiteers in Number 10 get their way with No Deal, it will be okay for them and their rich disaster capitalist friends as they bet against our economy and laugh all the way to their tax havens’.
In his speech, Sir Kier Starmer summed up the consequences of ‘no deal’ from a Labour perspective: “Manufacturing would be torn apart. The service sector decimated. There would be chaos and delay at our borders. Vital foods and medicines will not get through. And the Good Friday Agreement could be imperilled. [It will] will strip back rights and protections and sell off public services.”
At a Labour Business fringe, Hamish Sandison, who chairs Labour Business, said he wants a public referendum on Brexit before a general election because his members fear the UK will leave the EU if this does not happened.
Report by Hamant Verma and George Crozier