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Hunt’s tax attack on Labour is sure to backfire

Chancellor Jeremy Hunt delivers a speech warning about Labour's plans (Getty Images)

It should come as no surprise that Jeremy Hunt has signalled in a speech this morning that  he will try to make taxation a central theme of the coming election campaign. The tactic has certainly worked in the past. In 1992, fears that Neil Kinnock and his shadow chancellor John Smith would jack up taxes played a big role in a campaign from which John Major’s Conservatives – unexpectedly in many people’s eyes – emerged triumphantly. Five years later, Blair and Brown did not make the mistake of being cast as the high-tax alternative: they promised not to raise any income tax rate, or VAT.

The Conservatives have a very big problem when it comes to trying to scare people about possible Labour tax rises

Hunt’s claim is that Labour has made £58.9 billion worth of extra spending pledges over the next four years but has only allowed for £20.4 billion worth of tax rises. Therefore, he claims, the party has left itself a black hole of £38.5 billion which it will have to raise through extra taxes. In this latter assertion, Hunt has failed to allow for the possibility that Labour could borrow the money. That might be unwise, given the government’s existing debt burden. But it is a possibility nonetheless – assuming the party doesn’t frighten investors in government debt as Liz Truss did.    

According to Hunt’s costings, the most expensive items in Labour’s spending plans are an overhaul of bus services (£3.6 billion), increasing family doctors and offering two million more NHS appointments (£3.8 billion each), school breakfast clubs (£4.4 billion), doubling the number of NHS scanners (£6.0 billion), insourcing of public services (£6.5 billion) and – the biggest burden of all – Labour’s Green Prosperity Plan, whose stated £19.0 billion cost over four years has already shrunk from the original £28 billion a year initially promised. Hunt says he is being extremely reasonable in accepting this figure given that independent estimates of the cost of Labour’s plan to decarbonise the grid by 2030 have come out much higher: £116 billion in the case of consultants Aurora Energy Research.

On the other side of Labour’s ledger, Hunt suggests that VAT on private school fees could raise £3.8 billion, the energy profits levy £5.2 billion and closing the tax gap – the often-elusive efforts to raise extra revenue by cracking down on tax evasion and avoidance – £10.7 billion.     

There does seem to be something a little fishy in Labour’s own costings. Decarbonising  the grid, in particular, looks a somewhat open-ended commitment given that Labour hasn’t told us how it plans to achieve its ambitions – the question of how we will store energy from a grid that is dominated by intermittent wind and solar seems largely unsolved. Promises to raise extra revenue from cracking down of tax avoidance, too, have often produce miserably little revenue in the past.

Question is, though, will Hunt gain any traction with the public? The Conservatives have a very big problem when it comes to trying to scare people about possible Labour tax rises: they have already themselves jacked up the tax burden to its highest level since the 1940s – none of which appeared in the party’s 2019 manifesto. Obviously no-one knew then about the coming pandemic, but even so, that is a fading event in many people’s minds – yet the tax burden is still rising, mostly through the freezing of income tax bands.     

Labour this morning has hit back by accusing Hunt of having an even bigger black hole in his finances. Abolishing National Insurance, the party says, will cost the government £43 billion in 2025/26, rising to £45.6 billion by 2028/29. This is a bit unfair on the Conservatives given that they haven’t actually said they will abolish NICs in the next Parliament, only that they want 'to make progress towards that goal'. Nevertheless, it is questionable whether the Conservatives can gain traction on tax given their own record. We are in a very different place than we were in 1992. The danger for Hunt and he Conservatives is that every time they bring up the subject of tax it will be redirected against them, and that all they will achieve is to remind people of their own tax rises.