Rachel Reeves: Labour’s would-be chancellor faces increased scrutiny – but are her plans just tinkering?
The woman who is odds-on to be the next chancellor has recently been painting a bleak picture of the state of Britain.
In her keynote Mais lecture last month, Rachel Reeves described Britain as gripped by “recurrent crises”, and a state of decline comparable to the turmoil of the 1970s.
The Conservatives, she has claimed, have left the NHS “on its knees” and pursued a “scorched earth” approach to public services by making an unfunded commitment to cut National Insurance.
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But as the election nears, the scrutiny is increasing on Labour’s proposed remedies and whether they go anywhere near answering the fundamental questions they have posed.
Today, visiting the Manchester Royal Infirmary, Ms Reeves set out how Labour would fund their promises of breakfast clubs in all primary schools, hundreds of thousands more dentist appointments, and two million more NHS operations, scans and appointments a year.
They had planned to find the £2bn-a-year by scrapping non-domiciled status – in other words forcing people not permanently resident in the UK to pay tax on foreign income – until the current Chancellor Jeremy Hunt came along and nicked the policy.
Ms Reeves told me she’d been through the costings; and found that £2.6bn over five years could be brought in through closing loopholes in the non-dom policy – although the Institute of Fiscal Studies warns that some non-doms, who currently pay £6bn a year in UK tax too, could move abroad.
Funding HMRC to hire new compliance officers and use better technology to bring in more money from tax evaders would, Labour says, yield £5bn in five years’ time. Governments, both Labour and the Coalition, have managed to close the so-called tax gap, but the exact numbers cannot be guaranteed.
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And is this just tinkering? The OBR forecasts at the last budget show that just to maintain the current levels of day-to-day spending over five years, the next government of whatever stripe will need to find £20bn – just to stand still.
That doesn’t include capital spending on infrastructure, which would be about the same again, or any increases Labour may wish to announce.
Ms Reeves insisted to me that she has no plans to look again at the triple lock on pensions – which currently accounts for 11% of government spending and rising. Or raise personal taxes, currently at their highest for 70 years.
She insisted today’s announcements are not small change, or a drop in the ocean. With the election date uncertain, they are understandably wary of announcing more policies the Conservatives may steal.
But Labour’s dilemma is that to turn around the bleak picture they’ve painted will demand difficult choices on tax or borrowing – and we haven’t really heard what they are yet.
The trial is part of Project Acacia, an initiative from the RBA exploring how digital money and tokenization could support financial markets in Australia.
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