Get ready for a Labour government – and one that will probably turn out to be far more radical than you think. That’s what I said at the recent Spear’s 500 Live event at the Savoy, where our panel discussed the implications of a likely incoming Labour government.
[See also: Non-doms, IHT and VAT on school fees: What’s at stake under Labour?]
While the tax advisers on the panel focused on non-doms leaving the country, and a general air of disillusionment among UHNWs in response to a Conservative chancellor scrapping the 225-year-old tax scheme in the spring budget, I talked more about the broader and similarly challenging picture that’s now facing Brexit Britain.
There may be trouble ahead. If Labour do end up winning power at the election, which looks likely as we go to print, they’ll inherit an economic model that is not just under strain but, arguably, completely broken.
A big state, low-growth, high-tax economy
Contrary to all those who had hoped, at the least, that Brexit would pave the way for a dynamic, innovative, high-growth, low-debt and low-tax economy, what we’ve been given instead is a big state, low-growth, high-debt and high-tax economy where key measures, such as GDP per head, are now moving in the wrong direction.
[See also: High-tax, high-spend, big-state Britain is here to stay, whoever is in power]
And contrary to all those who talked about creating a pro-business society where the entrepreneurs and wealthy feel welcome and respected, Brexit Britain appears determined to create the very opposite: a society where the tax burden has soared and still far too much regulation is clogging up both small and large business.
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What concerns me is not just that Brexit Britain is now facing these serious problems, but also that so few people in our political class appear to have any solutions to them. Whether on the left or right, the 2024 election campaign has, at the time of writing, been notable for the complete lack of detail on how our leaders intend to deliver all the things that will be required if Britain is to find its way toward a new high-growth, dynamic economy.
[See also: Reasons to be bullish on Britain]
What is the new growth strategy for the country? How are we going to slash taxes while investing in public services that are collapsing before our eyes? What happened to the levelling-up agenda, which sought to generate growth and prosperity in the regions beyond London? How can we incentivise more businesses and wealth creators to come to Britain, and to stay? And how can we give people a reason to feel aspirational when we appear to be falling over ourselves to punish and tax those who have demonstrated the power of aspiration?
In defence of Boris
What makes me nervous about the country today is not just our inability to answer these questions, but also our broader failure to even entertain the possibility of a radical change of direction. Whatever you might personally think about Boris Johnson and Liz Truss, for example, they at least were able to think outside the box when it came to changing the way the country and our economy are run. While neither turned out to be up to the demands of high office, both were correct in diagnosing the need for a radical shake-up of public policy.
[See also: Populism is on the march – again]
Yet fast forward to today and we appear to be incapable of even doing that – or even merely thinking about and suggesting any radical alternatives to the dreary big-state, big-debt, big-tax consensus in Westminster that has flourished after Brexit.
Will the Labour Party usher in an exciting new zeitgeist? I seriously doubt it. While Labour will likely return to power in some form, whether in a hung parliament or with a majority in their own right, it’s clear this has much more to do with a near-total rejection of the Tories than any positive public endorsement of what Labour is offering.
Furthermore, given the extremely limited fiscal headroom for the next government, I think it’s almost certain that Labour will have to break their promises not to raise taxes further should they win power.
Radical Labour
With an enormous pile of very expensive debt, an ageing population and low growth, Britain simply cannot afford to keep the show on the road without raising more in tax. Which is why, I suspect, Labour will soon be looking for more ways to squeeze the wealthy above and beyond existing promises to clamp down on non-doms, raise private school fees and increase the windfall tax on energy companies.
[See also: Privately furious: Top independent schools braced for Labour’s VAT grab on fees]
Remember, if Keir Starmer is the next prime minister Britain will be led by somebody who not once but twice told us all to put Jeremy Corbyn into power. Starmer, put simply, is more radical than many people think, and I suspect in time that radicalism, especially if he wins a big majority, will soon become visible to everybody else.
Matthew Goodwin is professor of political science at the University of Kent. He tweets @GoodwinMJ
This feature first appeared in Spear’s Magazine Issue 92. Click here to subscribe
