Sir Keir Starmer and Angela Rayner are under extreme pressure from Labour’s Left wing.
At the party’s conference this week Mick Lynch, boss of the RMT transport union, set out his demands for nothing less than a complete Left-wing revolution of Britain and its economy.
“We seek the complete organisation of the UK economy by trade unions,” he said at a packed fringe event in a dark pub room in Liverpool.
“That’s the prize we’ve got to keep our eyes on – that union influence is universal across the United Kingdom, completely universal.”
From giant pay rises to a complete overhaul of work in Britain, Sir Keir’s promises raised campaigners’ hopes high, particularly after he won the biggest majority since Tony Blair in 1997.
The problem for Lynch is that the audience that came to hear union bosses is not the only one which matters.
Elsewhere at the conference, Rachel Reeves, the Chancellor, was speaking to a crowd of business bosses who had flown in from across the world.
They have a very different idea of sensible economic policies, and still have some influence on the Government, not least because Reeves’s plans rely on companies investing and hiring.
“We will be the most pro-growth and pro-business government you have ever seen,” Reeves promised.
Lynch might have sounded forthright – but the wheels have fallen off some of Labour’s more Left-wing pledges already.
Workers’ rights
Rayner’s plans to hand workers full employment rights from “day one” in a job, for example, are an area where some unions and bosses are passionately divided.
Conversations with Whitehall insiders and bosses make it sound almost certain that full-employment rights will only kick in following a probation period, but some union officials are keen on “day one” meaning “day one”.
“Unions will be more angry with us than business, because they want to push further,” predicts one government insider.
Workers are poised to get the right to ask for a four-day week, a core Left-wing demand of recent years. But the anticipated measure does not mean doing any less work.
Rather than the Corbynite dream of getting 100pc of the pay for 80pc of the time, the revived version envisages workers doing four long days, so overall they put in just as much time per week.
A right to switch off, leaving workers free from calls and the expectation they will keep an eye on emails outside their normal hours, appears to be subject to delay.
The Tories – initially seen as a spent force after their electoral hammering – are hoping to capitalise on the fears surrounding Labour’s looming workers’ rights overhaul at their party conference next week.
Sources said that Rishi Sunak held a roundtable with business lobby groups this month to shake out their concerns about Labour’s plans and use the list of worries as ammunition.
One person aware of the private meeting said the lobbyists admitted to being nervous about the lack of detail in Labour’s workers’ rights plans, flagged that companies could be put off hiring if the rules were too rigid and voiced a wider concern about “Labour’s rhetoric on the economy”.
Sunak was told that the Government “talking down the economy” could deter investment as it was hitting confidence.
“You can do that stuff in opposition. When you talk it down in government it has a market impact,” the source said.
Neil Davy, the chief executive of Family Businesses UK, who attended the meeting, warns: “The Government risks making well-intended decisions that could have serious unintended consequences.”
Surveys of businesses and households show a distinct slump in confidence in recent weeks, widely attributed to Labour’s gloom.
Reeves wants tax revenues to rise to repair the finances and fund her spending plans, hence listening to businesses.
It is not only plans for workers which are coming apart at the seams.
Non-doms
Labour also promised to scrap the non-doms system, that ultimate symbol of the global ultra-rich that has attained totemic status in Left-wing circles.
Yet as a money-making scheme, nominally to fund the NHS, the tax raid has much to be desired.
When the Office for Budget Responsibility assessed the Tories’ shake up of the non-dom rules in the spring, officials warned estimates of a £2.6bn annual haul from the 10,500 or so individuals was “highly uncertain”.
That is because it is the nature of non-doms that they move around. Such a “behavioural response” of non-doms was already estimated to reduce the haul from tax changes by around 40pc.
With Reeves threatening to scrap the status altogether, the rich have an even bigger reason to rethink their living and tax arrangements. An exodus has begun.
Christian Angermayer, a German cryptocurrency billionaire who has lived in the UK for more than a decade, has quit Britain for Switzerland in anticipation of the crackdown.
“Every non-dom I know has left or is about to leave,” Angermayer told Bloomberg.
That threatens to lose the Treasury money instead of raising more, undermining the basis of extra funding for the health service.
Officials are rethinking the plans, seeking ways to give the wealthy tax incentives to remain, in the hope of keeping some of them in the country.
Adam Smith, a former adviser to Jeremy Hunt, says the Tory changes were calibrated to make sure more is paid by the rich while limiting the harm to the economy – something he says does not apply to Labour’s plans.
“I am sure they will dress up their motivations in a cloak of ‘fairness’. But there’s nothing fair about others having to pay more tax so that the Government can implement a virtue-signalling, ideological attack on rich people,” he writes in The Telegraph. “The same would be true if they abolished ‘carried interest’ when the Opposition costing published before the election shows doing so could cost the Treasury up to £900m a year.”
Carried interest refers to a form of pay for fund managers in private equity, which can be taxed as capital gains, which is charged at a lower rate than income tax.
Labour calls this a loophole and promised to scrap it in its manifesto, claiming the move would raise more than £500m per year.
But the estimates referred to by Smith, which were carried out by the Treasury using special advisers’ assumptions, caution that only around 3,000 people earn money this way, and if lots of them leave the country the Exchequer will lose, not gain, tax revenues.
Capital gains
A similar threat comes from the widely anticipated raid on capital gains tax.
Analysis published by HM Revenue and Customs estimates a 10-percentage point increase in the higher rate of the levy would lose the Exchequer £2bn of revenue in 2027/28, as investors change their behaviour to avoid the higher payments.
Top investors have been making just this warning.
Rob Lucas, the chief executive of CVC Capital, which owns stakes in Six Nations rugby and the RAC, has said higher taxes could encourage executives to base themselves in cities abroad instead of London.
Reeves might not want to be seen doing financiers’ bidding, but she does want their money and is listening closely: Government’s investment summit next month seeks to attract more international cash into Britain. Sending high-profile investors fleeing after her Budget a fortnight later would defeat her purpose.
Private schools
Then there is the raid on private schools.
A political symbol more than a serious financial move, the upcoming application of VAT to fees has provoked a fierce backlash, and from more than just the striving parents who Labour sought to hurt.
The British Army is investigating the impact on military families who depend on boarding schools to care for their children while parents are on the move.
Parents who use private schools for kids with special educational needs and disabilities (SEND) also fear being hammered by the 20pc levy. Councils who fund privately provided SEND places expect to receive a VAT rebate on the fees they pay.
Meanwhile nurseries are supposed to be exempt from the tax, but small private schools which offer mixed-age classes of children aged between three and five are set to find themselves swept up with VAT.
There are few signs of the Government changing course here. Asked about the tax hitting toddlers, a spokesman said: “The vast majority of nursery classes will not be subject to VAT, as children have usually entered the first year of primary school by the time they are five years old.”
The most high-profile piece of class warfare is staying in place. But the backlash from its victims shows the strident leftism of Labour’s campaign, and its most ardent backers, is harder to enact than the party anticipated.
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