Views from the Labour Party Conference

Now that the Labour Party Conference has drawn to a close in Liverpool, what have we learned about our potential future government’s views on personal taxes? A clear message on some key tax issues such as non-doms but perhaps a number of points still left unsaid.

What was said about income tax? In Shadow Chancellor, Rachel Reeves’ Labour Party Conference speech, there was no specific commentary on income tax but she did say “I didn’t come into politics to raise taxes on working people.?Indeed, I want them to be lower.” At this stage however, Rachel Reeves did not make a commitment to cutting income tax but this is a clear intention at least for “working people”, a phrase that is used 12 times in her speech.?

Rachel Reeves also coined the term “securonomics” which she described as “… government putting economic security first.?Security for family finances.?And security for our national economy.” This all seems to fall under the umbrella of “tax fairly and spend wisely”, the main theme of the Shadow Chancellor’s speech.

In the speech itself, there was no mention of capital gains tax (“CGT”). However, in a fringe event at the conference, Rachel Reeves is quoted as saying “We don’t plan a wholesale equalisation of income tax and capital gains. We think it is important to create the incentives to invest in UK businesses, to help create businesses, to help grow businesses, and to have preferential tax treatment in doing that.”.? Some may note the phrase “wholesale equalisation” which could be read as meaning that they may still be considering equalisation between tax rates on specific items rather than across the board. Carried interest, for example, has been an area in the past where the Labour Party have been vocal about changing the tax regime but they were quiet on the topic in the main speeches at the Party Conference. This is except for Darren Jones MP (shadow secretary to the Treasury) who was interviewed on Politics Today straight after the Shadow Chancellor’s speech where he made a passing comment about the changes announced on private equity but he did not provide any detail.

On inheritance tax (“IHT”), the rumours around a review of IHT reliefs to build up a ‘war chest’ as had been reported by the media were not proven. IHT did not make the Shadow Chancellor’s speech at all.

Non-doms, however, were centre stage. A previous potential softening of Labour’s intention to reform the non-dom regime were definitely swept aside for a firm stance on abolition of the non-dom regime instead. What exactly abolition of the non-dom regime will look like in practice and how this will impact wealthy individuals who choose to make the UK their short term home will remain to be seen. It is certainly a regime with divided opinion both politically and economically.

Private school fees remained another firm stance with Rachel Reeves stating that she will close a “loophole” relating to them in her first budget as Chancellor. She is referring to tax exempt status for private schools which means that they currently do not need to charge VAT on their fees or pay business rates. As a tax professional, I am not sure that I agree with the use of the term “loophole” here as private schools are not exploiting a “loophole” but are simply applying a legal exemption in an agreed policy aim. Labour may choose to change the policy but this is certainly not closing down a “loophole”.

Other tax announcements in Rachel Reeves’ speech were in relation to a “proper windfall tax” on energy companies and to make online tech giants pay “their fair share of tax” as a way to help the high street. There was the announcement of a COVID Corruption Commissioner who will clawback the ￡7.2bn lost to COVID fraud. A theme across the Labour Party conference of ‘every little helps’ that whilst this on its own will not deal with some of the UK’s economic challenges, each measure will contribute in some way towards Sir Keir Starmer’s vision for the next decade.

Rachel Reeves reminded us that the position of Chancellor has never been held by a women in its 800-year history. She is certainly keen to be the UK’s first ever female Chancellor and the standing ovation at the Labour Party conference seemed to agree.

In summary, the Labour Party appear to be uncompromising on their views on non-doms and VAT on private school fees but have not really shared much more on wider policies on capital taxes such as IHT. The Autumn Statement on 22 November will be the government’s opportunity to set out their latest thinking on fiscal policy. We already know that a cut to income tax is off the table due to its inflationary impact but the question remains whether the Conservatives decide to consider a cut to other taxes instead.