Labour's More-of-the-Same Fiscal Agenda

By Dan Mitchell on July 8, 2024

At the end of last week, I wrote about the Conservative Party's crushing defeat in the United Kingdom.

In that column, I cited the Wall Street Journal, which groused that the Tories didn't deliver better economic policy. Indeed, the WSJ specifically complained that higher taxes were one of the main outcomes after 14 years of the Conservative Party being in power.

I wondered whether that was correct, so I crunched the numbers from the IMF's database. Lo and behold, the WSJ editorial hit the nail on the head. Measured as a share of GDP, there is now a much harsher tax burden in the United Kingdom.

Since the Labour Party argued that the Tories did a bad job with fiscal policy, that implies they would do something different.

Unfortunately, that is not the case.

As reported by the Telegraph, Labour is signalling more of the same.

Rachel Reeves ordered a review by Treasury officials that could pave the way for autumn tax rises as she warned that Britain is facing the worst public finances since the Second World War. The Chancellor has asked civil servants to compile a dossier on the current state of play over the coming weeks, and will present her analysis to MPs before the summer recess. It is likely to trigger fears that Labour is laying the groundwork for up to £15bn of tax rises in its first Budget, going far beyond anything proposed in the party's manifesto. ...wealth taxes, such as inheritance tax and capital gains tax, are one of the few options left on the table for a Labour government. On the campaign trail, Labour ruled out increases to income tax, National Insurance, the headline rate of corporation tax and VAT, which combined make up around three quarters of the Treasury's tax take.

I feel sorry for British taxpayers. The Tories raised corporate taxes and payroll taxes.

Now Labour wants to increase death taxes and capital gains taxes.

What's laughable is that the Labour Party wants people to believe their class-warfare agenda will be good for growth.

Kickstarting economic growth is the first of Prime Minister Keir Starmer's five key missions for his new Labour government and he has promised to secure the highest sustained growth of any G7 economy.

P.S. The above chart shows that Conservatives did not have a significant impact on the burden of government spending during their time in office. That's true, but a look at year-by-year numbers shows big differences when comparing different Prime Ministers. David Cameron actually was good on spending, and even the hapless Theresa May did okay. But Boris Johnson was an utter disaster and Rishi Sunak also was a big spender.