![Shadow Chancellor of the Exchequer, Rachel Reeves](https://www.telegraph.co.uk/content/dam/opinion/2023/08/26/TELEMMGLPICT000327948198_16930720546200_trans_NvBQzQNjv4BqgsaO8O78rhmZrDxTlQBjdLdu0TL-Cg_AMOUqySXmFgU.jpeg?imwidth=680)
![Shadow Chancellor of the Exchequer, Rachel Reeves](https://www.telegraph.co.uk/content/dam/opinion/2023/08/26/TELEMMGLPICT000327948198_16930720546200_trans_NvBQzQNjv4BqgsaO8O78rhmZrDxTlQBjdLdu0TL-Cg_AMOUqySXmFgU.jpeg?imwidth=680)
Labour is determined to reassure voters that it is no longer the hard-Left Corbynite party that it was just a few years ago, and that it no longer plans to squeeze the rich until the pips squeak.
In an in-depth interview with this newspaper, the shadow chancellor Rachel Reeves sounds remarkably Blairite. She says that she does not think that higher taxes are the route to better public services, she rules out increasing the top rate of income tax, and – perhaps most significantly – insists that she won’t levy a wealth tax or impose a mansion tax.
That is certainly welcome. The taxation of “wealth” – or the assets that people have carefully accumulated by putting aside income that has already been taxed – is among the most economically devastating ways of squeezing money out of the public. It punishes prudence and good investment decisions, and gradually destroys the capital on which a free economy depends.
Wealth taxes introduced to hit the “super-rich” invariably end up targeting the prosperous middle classes. They also change the basis on which people own assets. No longer is your capital yours to deploy as you see fit. Instead it is held on a semi-feudal basis, under permission from the state.
The idea of higher taxes on the wealthy is also becoming increasingly popular within the economics establishment, with universities and think tanks churning out endless research papers and policy proposals that denounce so-called “unearned” income and the like.
Left-wing thinkers and politicians regularly claim that seizing a percentage of people’s assets, either annually or on a one-off basis, would enable governments to fund “transformative” green programmes or other faddish schemes. Ms Reeves will need to relentlessly fight that tendency within her own party, especially as and when the fiscal going gets tough.
But she has also raised the stakes for the Conservatives. The Government is stuck in a financial rut, tied into a high-tax programme and spending rules that could prevent it from even delivering on its promise to cut income tax before the next election. Too many Tories have stopped talking about the link between taxation and growth, or of the wider societal benefits of lower taxes, including greater personal responsibility.
Yet there is no electoral mileage in turning Britain into yet another moribund European social democracy. Labour has evidently realised that the public does not want massively higher taxes or yet more redistribution. The Conservatives urgently need to devise a strategy. Not just to keep the total tax burden essentially steady (as Labour appears to be intending, albeit with some highly destructive changes like introducing VAT on private school fees), but to lower it, including through the abolition of entire levies like inheritance tax. If that entails reductions in spending, or changing the rules by which the Office for Budget Responsibility judges the public finances, then so be it.
The Tories cannot afford to be outflanked on tax by the Opposition. The Government is likely to find that a programme of major tax cuts would be much more popular than some seem to think. Above all, the Conservative Party cannot give up on the idea that Britain’s destiny is not to sink into EU-style stagnation, but to prosper under lower taxes and a smaller state.
Tories can’t let Labour outflank them on tax
The opposition party threaten to overtake the Conservatives on income and wealth taxation policies