Can Rachel Reeves Plot Labour’s Path Back To Government?

PM brazens it out on his tax rise, as Starmer's shadow chancellor searches for an alternative.
Reeves slated “this unfair, job taxing, manifesto-shredding, tax bombshell”.
Reeves slated “this unfair, job taxing, manifesto-shredding, tax bombshell”.
UK ParliamentPA

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Even by Boris Johnson’s standards, the sheer brazenness of his message to the backbench Tory 1922 committee was breathtaking.

Proving once again that he has more front than Brighton, the PM told his MPs that “we must never forget after all that we’ve been through…we are the party of free enterprise, the private sector, low taxation”. Yes, you read that right, ‘low taxation’.

Less than an hour later, his whips rammed through plans to create the biggest UK tax burden since the 1950s. Plans that generate the first brand new tax in a generation, and one that will be around for years to come.

But the almost total absence of any rebellion (the most some MPs could do was to abstain) confirmed Johnson’s total dominance over his party.

Yes, there were grumbles, privately from some on the frontbench as well as the backbench. But no one flounced, and nearly everyone was bounced - into voting for tax rises that few were happy about.

Earlier, in PMQs, Johnson virtually body-surfed the wave of Tory noise and cheers as his MPs defended him against Keir Starmer.

And in a strange inverse-proportion law of backbench support, while Tories who deeply disliked their leader’s message were cheering him on, Labour MPs who quite liked their leader’s message were strangely muted.

Starmer made all the right points. He cannily picked up on the fact that Johnson’s new plan would not only breach his manifesto pledges on tax, it would even breach his manifesto pledge on social care.

Johnson didn’t even try to stand by his “guarantee that no one needing care has to sell their home to pay for it”. That’s because he knows that it will be 2023 before his new plan kicks in, that some people can only afford care if their homes are sold after they die, and that many people outside the South can’t find £86,000 without selling their home.

Yet although Starmer’s words looked fine on paper, when uttered they lacked drama. Labour cheers may have been muffled by masks, rather than a lack of enthusiasm, but the overall effect was of a PM allowed to showboat his way through the session.

Just an hour later, the roles were reversed. It was Jesse Norman who tried to methodically, cerebrally make the case for tax rises, to the clear unease of his backbenches. But Rachel Reeves tore into the government from her first sentence and proceeded to deliver a bravura performance that delighted those behind her.

Reeves was armed with a script full of sharp soundbites (on NHS and care workers, “last year the public clapped them, this year the Tories taxed them” had a nice rhythm).

The shadow chancellor slated “this unfair, job taxing, manifesto-shredding, tax bombshell”. That felt like a lipsmacking-thirst-quenching-ace tasting-motivating message, designed to refresh a parched Labour party that is just gasping for some political Pepsi.

She also deployed the panto-style call-and-response device Johnson himself so often uses, asking her own side to yell ‘No!’ after a string of questions on the government plan’s flaws. One canny line picked up Sajid Javid’s own morning media round: “Will it clear the NHS backlog this parliament? No. And the health secretary says no.”

Reeves’s attack lines were good, and she actually relished taking Tory interventions. What was more interesting, however, was the way she began to fill out a bit more what Starmer had begun to hint about Labour’s alternative plans to fund the NHS and social care. More broadly, on being trusted with money and tax, Reeves hopes to plot a way back to government.

No Opposition is going to produce a detailed plan for such a huge policy before a general election campaign, but we were finally given clues to the “principles” that Labour will deploy beyond the Osborne-esque “those with the broadest shoulders should pay the most” mantra.

Reeves listed “those who get their income from financial assets, stocks and shares, sales of property, pension income, annuity income, interest income, property rental income, inheritance income”. It’s a long list, but the list would need to be long to generate enough big bucks for social care, if that new ‘levy’ is to be removed from paypackets after 2023.

I’m told Reeves and Starmer are united in being wary of devising the blunt instrument of a “wealth tax”, but it’s clear that even if they don’t use that exact phrase then income from the assets of the wealthy will be targeted. And poll after poll shows taxes on the rich are popular. Starmer’s spokesman refused to give any detail but did say: “there’ll be a need to look at all forms of income”, and more intergenerational fairness.

As it happens, Tony Blair Institute this week came up with its own alternative to a national insurance rise (Blair’s own preferred vehicle back in 2002/3).

It proposed an increase in income tax for the over-40s, replacing council tax “with a tax that is proportional to property values” and reforms to capital gains tax (all of which may delight even hardened Corbynites). Clive Betts today pointed out that council tax was another regressive way the Tories have been trying to fund social care.

Reeves and Starmer’s other strategic call is to be “pro-worker, pro-business”. They cite the “jobs tax” of National Insurance, acutely aware that the red tape of a hard Brexit has led many business groups to think the Tories have no real strategy for growth.

The key for Labour is avoiding tax hits for ‘ordinary’ workers. Insiders have been buoyed by new polls showing the public opposing the Johnson plans the more they know what they involve. Latest polls show 45% oppose the NI rise and 33% support it. Another poll showed strong opposition to the breaking the pension tax lock too.

After his move towards a high tax, big state government, Johnson is certainly rolling the dice. But Starmer may also take the gamble of finally opting for some kind of wealth tax, using the opening created by the Tories, while opposing some taxes business doesn’t like. Whichever party looks more united behind their tax plans may end up the real winner.


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