In Rachel Reeves’s Budget, there was one huge winner. Much of what she announced was directed at boosting the public sector, specifically health and education. Their workers have been handed tens of billions in extra investment, to go with the pay rises they seem to get just by asking, and their gold-plated pensions.
There was a loser: the private sector that is going to pay for it all.
If ever there was an indication of the shift in the fiscal balance of power it came yesterday afternoon. The party that once had one of its stars say how Labour was “intensely relaxed about people getting filthy rich” now wishes to clobber them. How hollow Peter Mandelson’s words appear today.
His was the administration under Tony Blair that embraced the wealthy, falling over itself to attract them to relocate and invest in Britain, welcoming many as non-doms. Not this incarnation.
To hear Paul Nowak, the TUC general secretary, crowing after Reeves’s address, telling bosses to live with the increase in employer’s national insurance by cutting their profits and dividends, said everything. His members would continue to press for higher wages, and woe betide anyone who tried to use the NI hike as an excuse for not complying.
In Labour’s new firmament, Nowak is a serious player, someone who these days treads the departmental corridors with a decided spring in his step. Under the Tories, it was captains of industry and entrepreneurs walking those carpets. Rich foreigners, non-doms, too. Not any more.
Sir Keir Starmer and Reeves will disagree, but how else to explain her Budget? As well as higher NI, company heads must find cash to pay for a boosted national living wage. Away from the office, assuming they’re in the wealthy bracket, which they usually are, they’ve got a whole raft of personal tax hikes to contend with, from tweaks to capital gains and inheritance tax to VAT on private schools to ownership of second homes. Rich farmers will no longer be able to automatically count on relief if they wish to pass on land to their families.
The private equity kings who have so dominated the modern economic landscape have seen their carried interest boon taken away. Family-owned businesses, looking forward to the prospect of private equity one day buying them out, may find that exit route not so readily available in the years to come.
Two roars from Labour’s back benches said it all. That was the greeting of 1p off a pint of draught beer and a whacking of private jet users with much higher duty. To the less well-off, Reeves giveth; to the rich, she surely taketh away.
None more so than non-doms. At a stroke, those wealthy foreigners who Tony Blair, Mandelson and others, went out of their way to woo, have gone. Their preferential tax status is to be abolished. Whether they choose to physically go is up to them.
That must be in Reeves’s calculation and she gives the impression of not bothering. There were some non-doms who abused the special treatment they were afforded, but there were plenty who ran businesses in Britain, invested and created jobs here. Not wanted, says Labour.
It’s a curious strategy. On the one hand, Starmer is quick to compare the £69bn raised from his recent investment summit with Rishi Sunak’s paltry-by-comparison £29.5bn. On the other, he does not seem to care where that money is coming from and what signal he and his chancellor are ultimately sending.
Perhaps he believes there isn’t enough in the Budget to force the rich to go the whole hog and relocate entirely. That could prove dangerously optimistic. It’s true, there’s much they can swallow, but the mood music is ringing loud and clear. This is her first Budget; what is the betting in future years that Reeves hits them again, and again? Best to get out now before it becomes even worse.
Countries are queuing up to attract the wealthiest, offering them tax breaks, in the belief they bring with them cash and jobs and prospects. Not Britain. Just when we so badly need them to help develop our creaking infrastructure, to back nascent, fast-growing industries, we’re driving them away.
Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.
