Labour in needless tangle over headline policy that didn’t exist in detail at all

Published

1 year ago

February 9, 2024

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The incredible – needless – tangle that Labour got itself into over its £28bn green investment policy only truly became clear as leader Sir Keir Starmer and shadow chancellor Rachel Reeves were killing it.

The flagship policy had been that it borrows £28bn a year to turn Britain green.

But at 5pm on Thursday, Labour announced it would only be borrowing just a tenth of that sum – £2.6bn a year – an extraordinary switch.

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Yet in the same breath, Sir Keir and Ms Reeves say that they will continue to press ahead with all the projects they were talking about doing before this change, reducing the scale of spending on just one project while keeping all the rest in train.

Only over the course of briefings and interviews did the true scale of the underlying mess become clear.

All the agony and pain that Labour has been absorbing over this policy – a bruise the Tories have been mercilessly punching – was for a headline policy that, in reality, didn’t exist in detail at all.

As recently as Tuesday, Sir Keir recommitted to spending £28bn a year. Last month, he told Sky News the Tories were trying to “weaponise this issue, the £28bn… this is a fight I want to have”.

Yet even as he said this, it wasn’t true.

Since it was first announced two years ago, this policy has already been changed three times – to delay its introduction in full until the second half of the parliament, make it subject to fiscal rules, and to set this target inclusive of existing government decisions.

This meant that despite repeating the headline figure, Labour was never going to spend anything like £28bn.

Some £10bn of the £28bn had already been committed by this Tory government – so would not need further additional borrowing by a future Labour government.

On top of that, Labour never worked out how to spend all the remaining £18bn a year. Around £6bn of that had no plan attached to it whatsoever, so that’s been slashed – a cost-free cut.

Shadow climate secretary Ed Miliband might have had designs for how to spend that remaining sum, but it never appears to have passed muster with the shadow Treasury team.

Yet it seems incredible that Labour was drawing fire, worrying and losing political capital and sleep over a borrowing pledge it did not know how to spend.

It had become a strange mirage of a policy – about signalling intent – yet Sir Keir appeared determined to continue fighting in public to defend it – until today. Now he will spend just £4.7bn, only £2.6bn of which is from borrowing.

Nobody would say this has been easy.

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But in killing it, Labour is setting a clear course that very tight fiscal discipline matters most, just at a point where big decisions are about to be made that will determine what Labour does in office.

Sir Keir and Ms Reeves made clear that the fiscal rules – artificial rules to curb borrowing – are more important than anything else, yet have not spelled them out in full.

Reeves – who seemed to be the architect of the U-turn – is pushing to copy the Tory fiscal rules, meaning an even tighter regime than the one implemented by Gordon Brown as chancellor in 1997.

This worries some, as it will hinder spending all the way through the next parliament if as many think growth remains anaemic.

It is one thing to scrap an artificial spending pledge which had become a political millstone.

But if Ms Reeves is about to bind the hands of Labour for the whole of the next parliament, with the blessing of Sir Keir, decisions like this could become more tricky and more frequent.

Politics

What is a wealth tax, how would it work in the UK and where else has one?

Published

2 hours ago

July 9, 2025

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What is a wealth tax, how would it work in the UK and where else has one?

The idea of a wealth tax has raised its head – yet again – as the government attempts to balance its books.

Downing Street refused to rule out a wealth tax after former Labour leader Lord Kinnock told Sky News he thinks the government should introduce one.

Sir Keir Starmer’s spokesman said: “The prime minister has repeatedly said those with the broadest shoulders should carry the largest burden.”

While there has never been a wealth tax in the UK, the notion was raised under Rishi Sunak after the COVID years – and rejected – and both Harold Wilson’s and James Callaghan’s Labour governments in the 1970s seriously considered implementing one.

Sky News looks at what a wealth tax is, how it could work in the UK, and which countries already have one.

What is a wealth tax?

A wealth tax is aimed at reducing economic inequality to redistribute wealth and to raise revenue.

It is a direct levy on all, or most of, an individual’s, household’s or business’s total net wealth, rather than their income.

The tax typically includes the total market value of assets, including savings, investments, property and other forms of wealth – minus a person’s debts.

Unlike capital gains tax, which is paid when an asset is sold at a profit, a wealth tax is normally an annual charge based on the value of assets owned, even if they are not sold.

A one-off wealth tax, often used after major crises, could also be an option to raise a substantial amount of revenue in one go.

How could it work in the UK?

Advocates of a UK wealth tax, including Lord Kinnock, have proposed an annual 2% tax on wealth above £10m.

Wealth tax campaign group Tax Justice UK has calculated this would affect about 20,000 people – fewer than 0.04% of the population – and raise £24bn a year.

Because of how few people would pay it, Tax Justice says that would make it easy for HMRC to collect the tax.

The group proposes people self-declare asset values, backed up by a compliance team at HMRC who could have a register of assets.

Which countries have or have had a wealth tax?

In 1990, 12 OECD (Organisation for Economic Co-operation and Development) countries had a net wealth tax, but just four have one now: Colombia, Norway, Spain and Switzerland.

France and Italy levy wealth taxes on selected assets.

Colombia

Since 2023, residents in the South American country are subject to tax on their worldwide wealth, but can exclude the value of their household up to 509m pesos (£92,500).

The tax is progressive, ranging from a 0.5% rate to 1.5% for the most wealthy until next year, then 1% for the wealthiest from 2027.

Norway

There is a 0.525% municipal wealth tax for individuals with net wealth exceeding 1.7m kroner (about £125,000) or 3.52m kroner (£256,000) for spouses.

Norway also has a state wealth tax of 0.475% based on assets exceeding a net capital tax basis of 1.7m kroner (£125,000) or 3.52m kroner (£256,000) for spouses, and 0.575% for net wealth in excess of 20.7m kroner (£1.5m).

The maximum combined wealth tax rate is 1.1%.

The Norwegian Labour coalition government also increased dividend tax to 20% in 2023, and with the wealth tax, it prompted about 80 affluent business owners, with an estimated net worth of £40bn, to leave Norway.

Spain

Residents in Spain have to pay a progressive wealth tax on worldwide assets, with a €700,000 (£600,000) tax free allowance per person in most areas and homes up to €300,000 (£250,000) tax exempt.

The progressive rate goes from 0.2% for taxable income for assets of €167,129 (£144,000) up to 3.5% for taxable income of €10.6m (£9.146m) and above.

It has been reported that more than 12,000 multimillionaires have left Spain since the government introduced the higher levy at the end of 2022.

Switzerland

All of the country’s cantons (districts) have a net wealth tax based on a person’s taxable net worth – different to total net worth.

It takes into account the balance of an individual’s worldwide gross assets, including bank account balances, bonds, shares, life insurances, cars, boats, properties, paintings, jewellery – minus debts.

Switzerland also works on a progressive rate, ranging from 0.3% to 0.5%, with a relatively low starting point at which people are taxed on their wealth, such as 50,000 CHF (£46,200) in several cantons.

Politics

Jingye and Whitehall officials hold talks over British Steel future

Published

5 hours ago

July 9, 2025

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Jingye and Whitehall officials hold talks over British Steel future

The Chinese owner of British Steel has held fresh talks with government officials in a bid to break the impasse over ministers’ determination not to compensate it for seizing control of the company.

Sky News has learnt that executives from Jingye Group met senior civil servants from the Department for Business and Trade (DBT) late last week to discuss ways to resolve the standoff.

Whitehall sources said the talks had been cordial, but that no meaningful progress had been made towards a resolution.

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Jingye wants the government to agree to pay it hundreds of millions of pounds for taking control of British Steel in April – a move triggered by the Chinese group’s preparations for the permanent closure of its blast furnaces in Scunthorpe.

Such a move would have cost thousands of jobs and ended Britain’s centuries-old ability to produce virgin steel.

Jingye had been in talks for months to seek £1bn in state aid to facilitate the Scunthorpe plant’s transition to greener steelmaking, but was offered just half that sum by ministers.

British Steel has not yet been formally nationalised, although that remains a probable outcome.

Jonathan Reynolds, the business secretary, has previously dismissed the idea of compensating Jingye, saying British Steel’s equity was essentially worthless.

Last month, he met his Chinese counterpart, where the issue of British Steel was discussed between the two governments in person for the first time.

Jingye has hired the leading City law firm Linklaters to explore the recovery of hundreds of millions of pounds it invested in the Scunthorpe-based company before the government seized control of it.

News of last week’s meeting comes as British steelmakers face an anxious wait to learn whether their exports to the US face swingeing tariffs as part of US President Donald Trump’s trade war.

Sky News’s economics and data editor, Ed Conway, revealed this week that the UK would miss a White House-imposed deadline to agree a trade deal on steel and aluminium this week.

Jingye declined to comment, while a spokesman for the Department for Business and Trade said: “We acted quickly to ensure the continued operations of the blast furnaces but recognise that securing British Steel’s long-term future requires private sector investment.

“We have not nationalised British Steel and are working closely with Jingye on options for the future, and we will continue work on determining the best long-term sustainable future for the site.”