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Labour are Losing the UK's Tax Tug of War

Updated: Apr 23

With the dawn of the new tax year on Saturday, the dreaded T-word is on everybody’s lips for different reasons. On one hand, you have the Conservatives parading their tax cuts through Parliament like a shiny new show pony. On the other hand, you have Labour continuing to moan about tax gaps and ‘non-doms’ and tax avoidance… Being in the Labour camp must be as boring as dating a banker. I wouldn’t be surprised if Keir Starmer’s dreams were dominated by his marriage to the HMRC logo.


Very soon, however, this obsession with tax is going to turn into a nightmare for Starmer. This is because talking about tax and HMRC is such a turn off for voters. In fact, the only reason accountants exist in this world is precisely because people are willing to pay someone else to faff around with the taxman and save themselves the painful hassle.


In the run up to an election, you want to be exciting voters with a beautiful, utopian vision for the future. You want to make them drool at the thought of taking home more money and enjoying a better quality of life with their children, who are going to a well-funded school and are protected by top quality healthcare. You do not want to be boring voters to death with lectures on the nitty gritty of the UK tax system.


Compare this to the other parties’ narratives.


The Conservatives are firmly aboard their electoral flagship, which is called HMS We’re Cutting Your Taxes. Yes, this is about tax too. But instead of five hundred PowerPoint slides, voters are presented with more money in their pockets – £900 a year, to be precise, when combined with last year’s cut. This makes you feel warm, gooey, and safe. And that’s good for your voting intention.


Equally, take a look at Reform UK. Reform are flying. The insurgent right-wingers are up to 15% of the vote in recent polls – a huge proportion for a new party.


Why is that? It’s because voters resonate with their policies. Whether you agree with it or not, kicking out illegal immigrants – whose hotel rooms cost taxpayers £8 million a day, when we can’t even house our own homeless – is an extremely powerful message.


Reform’s politics is cut-throat. There is no tip-toeing across gender identity or political correctness eggshells. And this idea of ‘saying it how it is’ hits home with the millions of people fed up with the health and safety compliant, high-visibility jacket-wearing United Kingdom.


And then we come to Labour, who want to clamp down on tax dodgers by spending £555 million on more tax officers. Compared to putting more money in your pocket and kicking out illegal immigrants, this vision for the UK is about as exciting as watching paint dry.


The irony is that the reasoning behind clamping down on tax avoidance is very appealing. Labour have said they would spend the rightfully reclaimed tax on free school breakfast clubs and more hospital and dental appointments. This is exactly the sort of policy pledge that turns us all into gooey chocolate fondants. And yet free breakfasts and more hospital appointments isn’t the headline – it’s dull and dreary HMRC reform.


Don’t get me wrong – we should all pay our way and stopping tax avoidance is a good thing. But the way Labour have framed it is just not inspiring.


What’s more, this whole tax pet project could turn into an own goal. Yes, the party points to an interview with the head of the National Audit Office, who said tackling tax avoidance could save £6 billion a year. But Starmer’s beloved HMRC may well have stabbed him in the back. The tax gap – the difference between how much tax HMRC should collect, and how much they actually receive – has fallen from 7.5% in 2005 to 4.8% in 2021/22. It seems HMRC under the Tories has been a better sailor for Labour’s flagship than Labour themselves were in 2005.


Perhaps Labour are still bitter that the Tories nicked their policy to abolish the non-dom tax status – which had allowed wealthy individuals to live in the UK but not pay domestic rates of tax on overseas income. I’m afraid that’s just politics. Or perhaps Labour have just run out of new ideas to fund the unfundable? Resorting to HMRC reform as a political pull seems a bit Desperate Dan.


And Desperate Dan is precisely what I am right now, since I’m running out of things to say about Labour’s love affair with HMRC. There’s only so much you can say to flog a boring horse. Perhaps Labour haven’t quite got their heads around that yet.

Image: Rwendland

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