Is the Chancellor about to shock us all in his upcoming Budget? There’s a serious chance he might.
Has Chancellor John Healey realised we’ve been taxed enough? (Image: Getty)
Everybody knows what to expect from Labour on Budget day. More tax, more trouble, more misery. Former chancellor Rachel Reeves gave us all that and more, adding presentational chaos to the mix. We’re still reeling from her £66billion tax hikes, reckless spending and the dizzying feeling that she didn’t know what she was doing. Given everything she threw at us, it’s amazing the economy is growing at all.
Her two Budgets will go down in the annals, and many expected John Healey to complete a brutal hat-trick. This week, he was warned he faces a £35billion shortfall, prompting fears he would plug the gap with another frenzied bout of pocket-picking. That would hit growth, slow the economy and necessitate yet another tax raid later. Given that every time PM Andy Burnham opens his mouth he finds another way to spend our money, that seemed the obvious bet.
The Budget is on October 28 but in one respect Healey has already outperformed Reeves. Before both her Budgets, speculation ran wild as everyone panicked about which taxes she might go for. Treasury leaks added to the frenzy. This time, Healey has kept a lid on loose talk. There have been rumours of windfall taxes on banks and oil companies, but nothing is certain. Or maybe something else is going on. Is Healey about to do something genuinely stunning?
Burnham has talked big about scrapping the state pension triple lock, reforming social care and launching a council house building spree. Yet this is for the long term. Right now, Burnham is focused on a potential snap election. The last thing he wants is a big Budget row.
Healey may resist the temptation to unleash a barrage of new taxes next week. He may do very little at all. No promises, but perhaps this Budget won’t be the horrorshow we fear.
Many in Labour, including Burnham’s number two Louise Haigh, have pushed for a big capital gains tax (CGT) hike, hitting non-ISA investors, second homeowners and anyone whose valuables have increased in worth. That’s a terrible idea. It would savage business investment, because what’s the point of taking risks if the state grabs most of your gains?
Every Leftie think tank and back bench MP wants higher CGT, ideally with a wealth tax on top, plus higher inheritance tax, new land taxes, online sales taxes and much more besides. But Healey reckons we need some respite from these money-grabbing lunatics. Tax is already at an all-time high.
He seems to have backed away from plans to lower the mansion tax threshold from £2million to £1.5million, a punitive measure that would raise little while crushing property market confidence.
I can’t imagine he’ll attack the 25% pensions tax-free lump sum, a rumoured target under Reeves but politically toxic. Perhaps he’ll leave our savings, homes and ISAs alone, too. Some of Reeves’s increases have yet to come through. Healey may decide they’re enough. Let’s hope so anyway.
Healey is under huge pressure to hike windfall taxes on banks and oil companies, which plenty of voters would welcome. They may feel differently if an even more punitive energy tax shuts down the North Sea, or banks pass extra taxes onto customers via higher mortgage and lower savings rates.
Every chancellor likes to pull a rabbit out of the hat. Healey’s most magical move would be to do nothing at all. Taxpayers and the economy be thrilled. They’d be even happier if he reversed some of the damage Reeves did. We can dream.
There is one catch though. A successful Budget could pave the way for five more years of Labour, after which Burnham and Healey will be free to do whatever they please. And we all know what that means.