Desperation has set in at the Rachel Reeves Treasury as public borrowing balloons and bond yields soar. Punishing the perceived rich, with mansion taxes and tighter inheritance tax rules is a crowd pleaser for core Labour voters.
Certainly, there is a case for reform of all property taxes, including business rates, but that is the kind of radical approach Labour is scared to embrace.
Similarly, its manifesto, as if written in stone, excluded it from a thorough-going reform of VAT, which is filled with historic loopholes.
As for a social-market approach to paying for social care, like that for opt-out pensions, reforms have been pushed off to the next Parliament. If Keir Starmer and Reeves make it that far.
What we have learned since Labour outlined its first fiscal changes to deal with an alleged £22billion black hole in the public finances is that the Chancellor, No 10 and advisers never fully understand the consequences of their actions.
Starmer’s infamous appearance in the Rose Garden a year ago, when he warned of the dire state of the inherited economy, only served to smash confidence.
Battening down the hatches: Keir Starmer an Rachel Reeves get ready for the tough times ahead
Giveaway pay awards to public sector workers and railwaymen without productivity deals simply served to fuel the current pay demands from resident doctors and others. The high awards served to fuel similar demands in the private sector and across the economy.
What the Government has failed to grasp is that every action has a consequence. There seems to be a profound ignorance of behavioural economics or the simple nudge theories fashionable when David Cameron was in Downing Street.
The employer National Insurance increase may have raised substantial income and been seen to protect working people – but has done nothing of the kind.
The number of jobs has fallen, vacancies dropped sharply and, perhaps most seriously of all, services sector inflation has soared.
As a result, hopes for lower interest rates have been scuppered even though the Chancellor takes credit for the five quarter-of-a-percentage point reductions since Labour took office.
Higher inheritance and capital gains taxes, and changes to non-domicile rules, have been rewarded by the exit of wealth and entrepreneurs from the UK. Second-quarter GDP may have surprised on the upside, at a snail-like 0.3 per cent, but investment – a key to growth – slumped. Which brings us to the mansion tax.
As a baby boomer sitting on property gains, I would be a victim of the changes. Never mind the struggle I had, some decades back, wrestling with a 12.75 per cent mortgage rate. Putting personal interest to one side, Reeves again fails to understand the consequences of her actions.
A key growth driver was her promise to build 1.5m homes in this Parliament. That is difficult enough as it is. But if one freezes people in pricier homes at the top of the ladder it can only put the brakes on the whole market and discourage builders from speeding up development.
Stamp duty changes already have had a malign effect. The best thing Reeves could do for equity investment is to axe stamp duty on share trades. Instead, she has encouraged regulators to sweep away listing rules, making markets less safe for private and UK long investors. Rash policy changes across the board produce unpleasant and unwanted outcomes.
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