The Budget is turning into a nightmare for the PM and Chancellor John Healey. Desperate times require desperate measures.
Andy Burnham is in a tight spot but a sales tax won’t save him (Image: Getty)
Labour is having kittens over what Healey is going to announce on October 28. How the Budget lands with the public could make or break Andy Burnham’s strategy, which is to generate a bit of optimism, then call a snap election to take advantage of Zack Polanski’s Green Party meltdown and the Tory-Reform split on the right. There’s a huge amount at stake.
We all know what Burnham would like Healey to do. Hike more taxes, borrow more money, then chuck the lot at voter-friendly pledges, such as building council houses, solving social care and maybe even buying some bullets for the army to show Vladimir Putin we mean business. But Healey can’t do that. He can’t do anything.
When the Cabinet assembles these days, it’s a glum affair, as Healey kills the post-Makerfield feelgood factor by banging on and on about dreary old “fiscal discipline”. He knows Labour can’t keep tapping up taxpayers, and we definitely can’t keep tapping up the bond market. Which makes ministers wonder why they joined the Labour Party in the first place. If they can’t go on a spree, they might as well be Tories.
Healey is reluctant to launch a third Labour tax blitz, having seen what the first two did to Rachel Reeves‘s career trajectory. Reform UK has warned he’s lining up a £30billion “sucker punch”, and he doesn’t want that on his CV. But Labour still demands he raises more money, and he has to oblige.
Options include slapping a bigger windfall tax on banks and oil giants, unleashing new property levies and hiking capital gains tax. Both could backfire, by driving business away. Now left-wing think tank the Institute for Public Policy Research, which has close links to Labour, has had a new brainwave. It’s urging Healey to slap a brand new targeted 2% sales tax on online purchases. It reckons this could raise £1.5billion a year.
Many people would like the look of that. Isn’t time greedy US tech platforms such as Amazon paid their share? They’re a key reason why your high street is boarded-up, although not the only one. Traditional retailers pay business rates on their premises, which online-only rivals largely escape. The tax could fund business rate cuts for pubs, shops, hotels, reviving high streets.
But there are downsides. Bosses at UK retailers like John Lewis and Marks & Spencer’s are worried because they sell plenty of stuff online too. An online sales tax could punish the very retailers it’s supposed to help. It could hit small businesses too.
There’s another issue. Who pays? Ultimately, you will. Retailers could absorb some of the cost, but with profit margins already tight, most will simply pass the tax onto shoppers.
The tax will strike every time you buy anything online. Just open your laptop, scroll on your phone, click Buy and bam! HMRC wins, you lose.
There’s another problem. There is zero chance this tax will stop at 2%. Like so many other levies, once it’s in place, it’ll become yet another stealthy way for cash-strapped chancellors to raise a bit more cash come Budget day, hoping that we won’t really notice. And with this one you don’t even have to leave the house.