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Does Labour’s manifesto add up? Here’s a ConHome series to investigate – named, of course, in homage to the Shadow Home Secretary’s policing plan.

The Policy: Bring in £6.4 billion from the “top five per cent” earners

Another chunk of the ‘perfectly balanced’ £48.6 billion of tax and spending rises set out in Funding Britain’s Future: Labour plan to raise this cash by lowering the threshold for the 45p rate to £80,000 and reintroducing the 50p rate for earnings over £123,000 (adjusting for Scotland’s ability to set its own income tax rates).

The Problem: It relies far too heavily on a very small number of highly responsive taxpayers

Although the Opposition say in a footnote that they have “allowed for a degree of uncertainty” over the measure due to the “inherent difficulty of forecast receipts from new taxes”, they don’t acknowledge that their plan is structurally vulnerable because of its dependence on squeezing a small number of taxpayers.

Comparing their plan with that of the Liberal Democrats, the Institute for Fiscal Studies reports that by relying on a small number of high net-worth individuals, Labour’s plans are very vulnerable to said people moving or altering their arrangements. Summing up its prospects they say that “it could easily raise something like the £4½ billion that Labour expects or nothing at all.”

Note that even their optimistic projection is about £2 billion short of the headline figure given in Funding Britain’s Future. Their “plausible range of estimates” is £2-3 billion, or a third to half of the headline number.

38 comments for: Abbott’s Arithmetic 3) Labour’s top-rate tax plan is too narrowly aimed at agile targets

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