CORBYN’S WAR ON WEALTH 6-PAGE SPECIAL
IT TOOK just a minute for Jeremy Corbyn to sit down after delivering Labour’s manifesto before t he emails started pinging their way into my inbox. ‘I have been watching the Labour Party in Birmingham and have now seen their manifesto,’ said one reader. ‘I have a Learjet on standby and a place for you on it if you so desire.’ I was tempted, but I declined his offer – made I think tongue in cheek (he’s a lovely ex-biscuit maker from Manchester).
Another said: ‘I just hope anybody with an ounce of sense does not vote for Labour. Some £400 billion of borrowed money? A spending spree of £83 billion? Total madness. God help us if Corbyn gets anywhere near No 10 because it will be the hard-working people of this country who pick up the tab for his idealistic plans.’ Spot on.
You get the picture already? Despite all the attractive commitments made in Labour’s ‘for the many, not the few’ manifesto – and the measured way Corbyn introduced it – shrewd readers realise that if it was ever implemented, it would be: ‘Goodbye Great Britain, hello Bankrupt Britain and hello taxes galore.’
For some, it would result in higher income tax bills. For ALL of Middle Britain, it would result in higher taxes on accumulated wealth – be it on our share portfolios and the income (dividends) and profits from them, or on our second homes (I don’t have one) or buy-to-let properties (again, I have none). Death taxes – inheritance tax – would also be ramped up.
In fact, I wouldn’t rule out ANY assault on wealth if Corbyn seized power. Even our taxfriendly Isas could be threatened as could the right to tax-free cash from our pensions when we choose to access them in later life. Nothing can be ruled out. Absolutely nothing.
Add in the likelihood of rising prices, economic fragility, creeping unemployment and it would all soon take us back to the dark days of the 1970s when James Callaghan’s Labour Government, crippled by a plunging pound, was forced to go cap in hand to the International Monetary Fund and borrow – and borrow some more – in order to save the country from rack and ruin. Please, never again.
It’s a view shared by Peter Hargreaves, founder of Hargreaves Lansdown, one of the country’s most successful businessmen of the past three decades who from humble beginnings – the son of a baker from Clitheroe – went on to build a FTSE 100 listed company.
MAY BE, he’ s viewed as one of the ‘financial speculators’ that Corbyn refers to in his party’s manifesto who have had a ‘free ride for too long’. If so, that’s ridiculous because Hargreaves was instrumental in building a multi-billion pound business that has created employment opportunities galore in Bristol – and has empowered millions of people to make themselves wealthier( Wood ford excepted) by enabling them to invest from the comfort of their armchair. An entrepreneur par excellence. In the wake of the publication of Labour’s manifesto, Hargreaves told me: ‘I love this country, but I hate the politics and the entrenched out-of-touch establishment.’ But his harshest words were saved for Corbyn.
He said: ‘Corbyn would soon turn the UK into the West’s version of Venezuela, a broken South American country destroyed by Left-wing governments. Despite having one of the greatest oil and gold reserves of any country in the world, the populist socialist policies pursued by presidents Hugo Chavez and Nicolas Maduro during the 2000s have left 95 per cent of its population in abject poverty. The Corbyntype extreme Left is a far greater political worry than any other on the immediate horizon.’ So, does he have his private jet – an Embraer Legacy – on standby in case Corbyn gets his grubby feet inside No 10 Downing Street?
‘I wouldn’t leave this country,’ he said. ‘I’m too patriotic.’
Of course, it’s easy to be enticed by the plethora of offerings in Labour’s manifesto. In fact, like a bag of liquorice allsorts, there’s something for all and on the surface it’s all rather tasty. A hailstorm of jelly baby promises.
So, if Corbyn wins next month’s Election, there will be an end to tuition fees, a move greeted enthusiastically by undergraduates among the audience at Birmingham University, from where he launched his manifesto.
There will be an extension of both maternity and paternity rights, free shares for workers, and a culling of the gig economy and zero-hour contracts. Indeed, if there is an economy still functioning in 2030, there is even the prospect of a 32-hour working week to look forward to (pull the other one Corbyn).
There’s more. Greater rights for tenants, free prescriptions, free full-fibre broadband courtesy of a nationalised arm of British Telecom (what would Maureen Lipman’s Beatrice Bellman, the star of BT’s privatisation campaign in the late-1980s, think about that?) and the introduction of a real living wage of at least £10 an hour. A widespread nationalisation campaign – rail, mail, water and energy – that Corbyn claims will result in lower fares and utility bills (pull another one Corbyn).
THERE are even pledges to address some of the campaigns we’ve run as a newspaper. So, for example, ‘ recompense’ for women born in the 1950s whose State pension age was pushed back without adequate notice, plunging some of them into poverty – and free TV licences for the over-75s.
Even a halt to bank branch closures ( something we’ve campaigned on for more than 20 years), a beefing-up of the local post office service (offering loans to small businesses), and an end to the charging of fees for withdrawing cash from an ATM. All commendable pledges, but for the time being mere words – and probably excruciatingly difficult to deliver.
In truth, the manifesto reads as if Jeremy Corbyn has suddenly discovered a magic money tree. Shake a branch and there’s more money available. Or as money expert Brian Dennehy put it, the manifesto is a ‘mammoth wish list with a touch of Lewis Carroll thrown in for good measure.’ Fantasy politics that should never be enacted.
So where is all the money going to come from to cover this £83 billion spending splurge?
This is where serious cracks in t he manifesto suddenly start appearing. Although all the pledges and promises are spelt out royally, there are only hints at how this great spending spree is going to be funded. As Hargreaves told me: ‘ It’s what Labour’s manifesto
HOW YOU’LL PAY – AND WHAT TO DO
doesn’t say – rather than what it does – that is the worry.’ In other words: watch out Middle Britain.
In Labour’s defence, a supporting document called ‘ Funding Real Change’ spells out how it intends going about finding £83 billion of extra revenue. It doesn’t make for easy – or comfortable – reading, especially the section on ‘taxing income from wealth equitably and efficiently’. And in places, you have to read between the lines in order to understand Labour’s intentions.
Business will take the biggest hit – a £30 billion hit – and few will disagree with Corbyn’s specific targeting of multi-national companies( the likes of Amazon and Facebook ). He also say she will introduce a windfall tax on oil companies. More disappointing is the intended reversal of some of the recent cuts in corporation tax that would hurt both small and big businesses alike. It doesn’t take a rocket scientist to realise that higher company taxes will make Great Britain plc less competitive and less profitable, impacting adversely on jobs and reducing the ability of companies to distribute the dividends that help fund our pensions. Falling profits are not good for share prices.
Roger Clarke, a partner at Leedsbased wealth manager The Private Office, says: ‘The UK has already experienced an exodus of companies to overseas centres. The proposed increase in business taxes will encourage more to follow.’
Jason Hollands, a director of
Tilney, says Labour’s ‘unfriendly’ business policies will undermine the UK’s appeal as a destination for international investment’. Oh dear.
On the personal side, as the ‘for the many, not the few’ manifesto strapline implies, high earners will pay more in income tax. Or as the manifesto more delicately puts it: ‘We’ll ask those who earn more than £80,000 a year to pay a little more income tax.’ So, annual income over £80,000 – in the tax year starting April 6 next year – will be taxed at 45 per cent tax while income in excess of £125,000 will attract 50 per cent tax. It means 1.6 million people – the top 5 per cent of income tax payers – will pay more tax.
For someone with annual income of £100,000, it will result in £1,000 of extra tax. Yet, with Labour stating it will freeze the £80,000 threshold, more people over time will be dragged into paying more tax – 1.9 million people by the tax year starting April 6, 2023 according to the Institute For Fiscal Studies.
Yet, it’s Labour’s plans for taxing wealth that are truly shocking – and frankly rather scary. ‘We will end the unfairness that sees income from wealth taxed at lower rates than income from work,’ the manifesto casually states.
BUT this is code for a vicious assault on accumulated wealth. More is revealed in the supporting ‘ Funding Real Change’ document (not to be read if alone at night). It will result in higher tax rates imposed on capital gains made from the sale of personal assets – shares, holiday homes and buy-to-lets. They will increase in line with income tax rates.
Si multaneously, allowances designed to mitigate tax will be reduced to a ‘de minimis’ level of £1,000 – the likes of the capital gains tax allowance ( currently £12,000) and the annual dividend allowance (£2,000).
So, for example, a 40 per cent taxpayer who crystallises £15,000 of gains on a share would currently be left with £14,400 after 20 per cent tax and use of the CGT allowance. Under Labour, it falls to £9,400 as a result of the £1,000 allowance and 40 per cent tax.
Meanwhile, a 40 per cent taxpayer who receives £5,000 of dividends is currently left with £4,025 after use of the £2,000 allowance and dividend tax at 32.5 per cent. Under Labour (£1,000 allowance and 40 per cent tax), the figure falls to £3,400.
Hollands describes such an overhaul of wealth as ‘alarming’. He predicts that if Labour wins next month, there will be a ‘clamour’ to sell shares held outside an Isa or pension – before the new rules kick in. He also believes such a draconian CGT regime would stop people selling and buying shares to ensure their portfolio remains in line with their objectives and risk profile. Very investor unfriendly.
Holiday- home owners would face a ‘second homes’ tax – equivalent to double what the property would attract in council tax. More people would also be swept into inheritance tax as a result of a paring back in the nil rate threshold to £325,000 – the level it was at in 2015. Add in VAT on private school fees, a scrapping of the marriage tax allowance and a financial transaction tax on the City and you have a recipe for economic and household disaster. All alarming.
As my biscuit man said in an email: ‘Labour’s manifesto is pie in the sky policies.’ Yes, Corbyn’s taking the biscuit. He must be avoided at all costs.