The second bit of good news concerns the Labour Party. In an interview with this newspaper, the shadow chancellor, Rachel Reeves, ruled out increases in the top rate of income tax and capital gains tax and said that Labour would not introduce a wealth tax or a mansion tax.
Moreover, she said that the overall tax burden was high enough. Any spending initiatives that Labour ministers wanted to push through would have to be financed by economies found elsewhere. Beyond the immediate years, higher government spending would only be made possible by the higher tax receipts that would come from economic growth.
Call me naive, if you like, but I thought this was a breath of fresh air. Admittedly, how on earth such a prospect would be accepted by the Labour Party is one worry.
Angela Rayner’s remarks to the TUC last week are another. She said that a Labour government would repeal recently enacted laws restricting strikes. That made my heart sink. But perhaps we should regard Ms. Rayner as the John Prescott of our times and not presume that what she says will become Labour policy.
I thought that Rachel Reeves’ remarks were highly significant. As we move towards the next election, if the perception were to grow that a Labour government would impose swingeing tax increases, it wouldn’t only be rich people who would be affected.
There would be an exodus of capital and a waning of confidence in both the UK economy and UK assets. Never mind what this would have done for a new Labour government. It would also have made things difficult for the current Conservative government.
As it is, it looks as though we are going to have broad agreement that tax rates and the tax burden are plenty high enough.
Cynics will say that this is only because a Conservative government has followed socialist policies, including socialist tax rates. But remember where the Labour Party has come from all too recently.
The idea that a Labour government will not be imposing higher tax rates is a good start. It will provide the basis for a debate about the really important subject, namely how we can get decent economic growth.
Roger Bootle is senior independent adviser to Capital Economics.
