Richard Short is the Deputy Director of the Conservative Workers and Trade Unionists and Parliamentary Candidate for St Helens South and Whiston.
Venezuela’s socialist regime swept into power on a populist vote promising a land of milk and honey, but ended with people eating their own pets to survive. The regime was heralded by the very top of the Labour leadership as proof that socialism can work.
Labour’s socialist General Election pitch is clear – an unrelenting attack on billionaires – but, just like Venezuela, it is the ordinary workers who will pay in the end.
Jeremy Corbyn says that the 150 billionaires in the UK need to fear a Labour Government, avoiding criticism of millionaires on account of the fact he is one. The UK’s billionaires certainly won’t be in fear. They have resources to more than match any civil service department to mitigate the increased costs brought to them by a Labour Government up to and including leaving the country altogether. Those that need to be in genuine fear of a Corbyn-led Government are the ordinary workers up and down the country. The workers on average wages, the workers who work hard every day to make ends meet, the workers who simply cannot afford a Labour government.
At the 2017 election, John McDonnell, defined ‘the rich’ as those earning £80,000 or more a year. This is a nice salary for anyone but it’s not a fat cat wage. £80,000 is your local school’s head teacher, your local police superintendent and your own GP. It remains to be seen if this will be repeated in the 2019 election and there have been no indications that this will change but this is largely immaterial. What the ordinary workers need to fear is that whatever their proposals on taxation this will only be the starting point. A shallow minded and lazy tax and spend policy can only go so far on tax taken from the highest earners. Previous Labour Governments have punitively targeted tax hikes to their definition of “the rich” to cover their spending plans, only to discover that two things happen.
Firstly, despite the top one per cent of earners paying 28 per cent of income tax, the higher rate tax base is tiny and dwarfed by the basic rate tax base. There is little to be gained and everything to lose by targeting such a small section of society for even more tax and we can see the results of when they try. The last Labour Government attempted to tax their way out of economic crisis in 2008/09 and brought forward a raising of the 45 per cent rate for the highest earners to 50 per cent. They forecast an increased tax take of £2.5 billion from this, but behavioural changes of those being taxed, such as bringing forward income so it was paid before the rate came into effect, reduced this so much that it actually reduced the tax take for these high earners by £1.8 billion.
The long-term effect of this will always be speculative as the Conservatives were returned to power in coalition and the 50 per cent rate was reduced back to 45 per cent. Although this move was attacked ferociously by Labour it resulted in a tax revenue increase of £8 billion. Based on previous form, had Labour remained in power after 2010 they will likely have increased the tax rate ever higher. We know this because that’s exactly what they did in the 1970’s. On gaining power in 1974, the returning Labour Government hiked the top rate of tax from an already eye-watering 75 per cent to a stifling 83 per cent. Rock stars, celebrities, the rich and famous fled overseas taking their taxable income with them leaving the ordinary worker beleaguered and completely exposed to increasing tax hikes.
This brings me on to the second consequence and one which all reasonable hard-working average earners need to know. Even the most economically incompetent Labour Government can be made to understand that there is only so much which can be extracted from the high earners before they are incentivised enough to take their money and wealth away from taxation. Whether this is by fair means or foul the result is the same, less tax paid into the Exchequer and fewer resources for public services. Denis Healey always denied saying he’ll “Squeeze the rich until the pips squeak” and there could be some truth to his denial but after his squeeze on the highest earners and failing to raise enough tax revenue, his 1970’s Labour Government turned on the ordinary workers. With a far larger tax base the increase from 30 per cent to 33 per cent and then to an astonishing 35 per cent basic rate brought some of the revenue they needed. Running out of people to tax, he notoriously turned to the International Monetary Fund for an emergency bail out loan.
No matter how loud the rhetoric about going after the corporations, the rich, the elite, Labour Governments always attack the very people they purport to represent. Even in recent history, in 2008 the Labour Government attacked the very lowest earners by scrapping the lower rate of ten per cent. The ones with most to fear most from a Corbyn Labour Government are the hard-working average earners. Gestures like increases in minimum wage will be evaporated in the heat of a tax hike on those least able to afford it.