Rachel Reeves, shadow Chancellor of Labour, said that a Labour government would end the stealthy raids on working household incomes and provide businesses with lasting tax relief for investment. She also pledged to address poor living standards and economic development.
She told the media that Labour wants to end the tax threshold freeze, which is costing workers who pay the 20% basic income tax rate £750 ($920.14). She also wants to make the full-expensing tax relief, which is a 100% reduction on capital investments, permanent.
She added that the policies must be affordable in terms of her fiscal rules, which stipulates that the debt as a percentage of GDP must fall and daily spending should be covered by tax revenues.
Reeves was asked if she would use a more generous debt measure to achieve the goal. She replied: “I won’t try to fiddle with the numbers or do something different to obtain better results.” We will use the models that the government uses.”
Reeves spoke days before Chancellor Jeremy Hunt makes his autumn statement, which is scheduled for Nov 22. He will be announcing a number of policies to boost growth including extending full expense for at least a year.
The Labour Party is set to form the new government. Labour is on course to form the next government.
Reeves stated that “this is a low-growth government, which is why it has high taxes.” She attacked specifically “the 25 tax increases that we have seen under Rishi sunak.”
Conservative Party official: “Labour don’t have a foot to stand on.” The Conservative Party said that Labour had increased taxes in all of their budgets when they were in power. They will do the same thing again if ever they get elected.
Reeves was criticized by some for failing to offer a clearer alternative to Hunt despite the rise in the polls. She stressed that Labour’s top priority was growth. She emphasized that planning reforms and pension reforms are key to unlocking investment in business. The Conservatives are pursuing both.
Both parties have pledged to reduce the tax burden, which is at a level not seen since just after World War II.
Reeves stated, “We’ve got the worst possible situation. We’ve got high inflation and growth at the same time.” The impact has been higher tax rates. I am concerned that those with average incomes are paying more tax due to being pushed into higher tax brackets. This is a sign that you have failed. “The government is taking money from the working class.”
She said Labour would support the government if they extended full expense. Reeves stated that Labour would support the government if it extended full expensing for an additional year.
The full expensing method allows businesses to deduct the entire cost of an investment at once. For every pound invested, the tax is reduced by 25 pence. Currently, the policy will end in March of 2026. The extension could cost as much as £10 billion per year. By 2027-28, re-linking the income tax thresholds to inflation would cost approximately £3 billion.
The government is set to raise £40 billion per year by 2028, as increasing wages force millions of people to pay basic or higher rate tax. Sunak introduced the policy when he was chancellor, and Hunt extended it.
By the end of this forecast, the average basic-rate tax payer will pay an additional £750 per year in taxes.
Resolution Foundation estimates that Hunt’s fiscal headroom will be around £15 billion at the autumn announcement, up from £6.5 in March but still very low.
Reeves reiterated that she had “specifically ruled-out a wealth-tax” and that “there are no plans to increase taxes”, besides the £5 billion – £7 billion announced from scrapping nondom breaks for wealthy internationals, charging VAT on fees at private schools and closing a loophole in private equity.
The Labour Party would increase investment in pension funds by the UK, by giving the regulators more powers to consolidate the industry to “deliver the full potential to British savers and UK Plc.”
A co-investment program with the British Business Bank would be set up to attract more private investment in UK start-ups.