Why Labour rejects a wealth tax | FT Interview

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We're going to get into this very, very quickly, and to introduce our panel. You may well be aware that one of the hottest tickets in London, in business. is getting to spend time with Rachel Reeves, the shadow chancellor. So you're all very, very privileged.

She's not only shadow chancellor, a central figure in Keir Starmer's team. You probably know that chancellor of the exchequer is the last great office of state that's not been held by a woman. So if polls are to be believed, Rachel will be smashing that last glass ceiling in about 18 months.

John McTernan.

Thank you. Thank you.

I should also add, by the way, that she's such a political operator that she announced there would be no wealth taxes a week before coming to see the FT.

So that's the political force we're dealing with. John McTernan was political secretary to Tony Blair in Number 10, also director of comms for the Australian Prime Minister Julia Gillard, and just told me that he was also thinker in residence to the South Australian government, which is something we don't yet have, but maybe that's a role we could create...

Yes.

...in Britain. He's also a senior adviser to Burson Cohn & Wolfe.

Our own Camilla Cavendish, I'm sure you know, was head of David Cameron's policy unit. Now sits in the House of Lords as an independent crossbencher. She's been an adviser to the government on health policy, and of course writes a regular column for us in the Weekend FT. That's our panel.

So just before we start, a little bit of audience interaction. How many people here are expecting a Labour government after the next election? So that's a lot.

Fingers crossed.

How many people here are excited and pleased about the idea? Well, a few less. You can't all be paying the Ulez.

No.

But lot of positivity towards it. Where to start? I suppose the question I'd start for with Rachel - actually I'll go with one first, which is wealth taxes, the decision not to raise them, or the announcement you won't raise them...

...tax wealth now. [INAUDIBLE Tax wealth now! Tax wealth now!

Well, I was actually going to ask about it.

...supported 80% of the UK population.

Would you like me to ask Rachel a question about this? That's what I was about to do. So why don't you sit down? Why don't you sit down and I'll ask a question, please?

Sit down!

Or do you just want to shout your own views? Or do you want to hear what the next... possibly next chancellor might do?

...ruled out the wealth tax...

Well, OK, enough. Rachel, what I wanted to ask you was, does the fact that you have ruled out raising wealth taxes mean that you are, to borrow a phrase, intensely relaxed about the current distribution of wealth in Britain?

Well, we've got the highest tax burden today since the Second World War. And I don't wake up every morning thinking how we can introduce new taxes. And I don't believe the way to greater prosperity is through higher taxes. We've got to grow our way to higher prosperity.

And that's why all of the policies that Keir and myself have set out have been around this mission to have the highest sustained growth in the G7. And that's the way to improve people's living standards, and have the money that we desperately need for our public services.

It doesn't mean our tax policy is going to be exactly the same as the Conservatives. We've already said, as you know Robert, that we would get rid of the non-domicile tax status, whereby you can make your permanent home in the UK. But because your father was born somewhere else, say that for tax purposes you'd prefer to pay your tax elsewhere. We would get rid of that. And we would put that money into our National Health Service and for breakfast clubs for all primary school aged children.

So there are differences that a Labour government would make. But a blanket wealth tax? No, that's not our policy. And it's not something I would do if I become chancellor of the exchequer.

But just to be clear, you don't feel the need to sort of act to push redistribution a bit more on wealth?

What I want to see is living standards improve for ordinary working people. But the reason why living standards have been so abysmal these last 13 years is not because taxes aren't high enough. The reason why living standards have been so abysmal is that the economy has not been growing.

Now, I know we've had these revisions, which mean instead of no growth we've now got low growth. I mean, hardly meriting the victory lap the chancellor is now on. We need proper economic growth, sustained economic growth that improves living standards. And that is not through having a wealth tax. It's having a broadly based, strong economy, creating good jobs in all parts of the country. And that is my primary focus as we approach the next election, and for what I would want to do if Labour secure that victory next year.

OK, fair enough. Can I say, by the way, it may not be a first for Rachel, but for me, the first arrival of being heckled like that.

Ha, ha.

I'm feeling I've ascended to a new strata.

Let's zone out a bit, Rachel. I mean, a lot of the stuff that you've talked about, a lot of the things are the green energy plan, skills reform. These are very long term projects. These are not things that deliver quickly.

So what I think I would like to know and the audience would like to know is let's assume we can wave a magic wand. You've won the election. It's that easy. You've won the election with a working majority. How will things be better in the first... at the end of the first year of a Labour government, as opposed to the end of a term?

Well, first of all, because I think we're in Camden and so Keir Starmer might not be far away, first of all, there's no complacency. Just in case he's out there in the audience, there's no complacency. The Labour party doesn't deserve to win elections. We have to earn every single vote. And that is what we are absolutely focused on this next year or so.

But of course, if I do have that opportunity to serve as chancellor in the next Labour government I want to improve things. I haven't been sitting around in parliament for the last 13 years in opposition thinking how can I do things a little bit better than the Conservatives? I want to genuinely improve people's living standards and improve our public services. And that is what we will achieve.

Now, look, the scale of the challenges and the economic inheritance that an incoming Labour government will have are immense. This is not 1997. Public services are in a terrible state, they were in 1997. But the economy is barely growing and has barely grown these last 13 years. It's not generating the tax revenue to improve public services. It's not generating the growth to improve living standards.

But by the end of the first year of a Labour government this is what I am determined to do. I'm determined to bring the stability and the security back to our economy. Because you said at the beginning I spent a lot of time meeting businesses. I've lost count of the number of times businesses have said to me, we've got money to invest, but we're not choosing it to invest it in Britain, because we don't have the stability. We've had 11 growth plans in 13 years. We don't know whether we're coming or going. The tax policy is all over the place. We don't know what's happening on planning, which makes it harder for us to invest. I want to give that stability and security so businesses know that they can invest here.

And then after a first year of a Labour government I want to see that investment making a tangible difference to people's lives, because businesses are investing and creating jobs, paying decent wages in all parts of the country. And there are massive opportunities, in life sciences, in tech, in electric vehicles, in carbon capture and storage. And I want those jobs and that investment here.

Every country in the world is trying to get their hands on that investment. And I make no apology for saying I want more of it here in Britain, creating those jobs and creating that prosperity.

But I am also determined that after a year of a Labour government that people start to see our public services turn a corner, that NHS waiting lists are down, that people, when they want to see a doctor, get to see them, not in two weeks, but they get to see the doctor when they need to see her. And they get to see the doctor that they want to see.

And I want our children to be able to go back to school at the beginning of term not being told five days beforehand that they can't go to school because the roof is literally falling in. I was motivated to get involved in politics in the 1990s because our sixth form was a couple of prefab huts in the playground. Our library was turned into a classroom because there were more students than there was space. And there were never enough textbooks to go round.

But even then, after 18 years of Conservative government, we went back to school at the beginning of every term because our buildings weren't collapsing. And I want to ensure that every child gets the education they deserve, because they're not getting it under this government.

I'm going to come back to public services in a bit more detail in a bit. John, when we've talked in the past you've sort of made the case that Labour is actually far more radical than it's appearing at the moment, and that, for reasons that we all understand the politics of elections and campaigns, there has to be a substantial evidence... emphasis in any opposition on reassurance, but that it's actually much more radical? And we can expect more dramatic change. So tell me. Why is it more radical than it seems?

Well, one of the difficulties about politics in the UK is the cynicism that has crept into politics. The fact that over the last 10, 13 years we've had promises that were broken, promises that were never intended to be kept. Rachel said 11 plans for growth in 13 years. That means that every politician who's active in the House of Commons has a background of distrust in the words that they utter.

And the thing that I think about Keir and about Rachel is, listen to their words. And the words are radical in intent. And the lobby and commentators try to find ways in which the words will be broken. They love to put the frame of Labour reneging on a pledge or something.

The FT had a terrible, appalling distortion...

I'm sorry. I think we've got sound problems.

An appalling distortion of Labour policy that said that we were walking backwards on something when Labour were committed to consult, which is what any government would do. As an opposition, you can't consult on your policy with the weight of a government. As a government, you're going to make a change? You do.

The thing is, when Keir says, we'll back the builders, not the blockers, he means it. And what does that mean? It will mean building in the green belt, not the green bits of the green belt, but the grubby, shabby bits of the green belt that we all know exist.

It will be building on TfL car parks, which have been, up till very recently, blocked by transport secretaries and housing secretaries. It will be putting up the windmills that we need, onshore wind for renewable power, which is not just power. It's jobs. It's supply chain.

And it will be putting the pylons up. In the next six or seven years we need more pylons built than we've had in the last 30 years. That will get done.

Now, that will be radical in its impact. It will be radical in what you see in the change. And that's what I think about the Labour party. People go, will they really do it?

Well, the thing is, they will do it. And the proof of it is Rachel also says what she won't do. And that's the point of politics. Sometimes the toughest thing you have to do in politics is say no. You define yourself by saying no.

And the reason... I don't know if our young comrades are still here. The reason that there won't be a wealth tax is because 80 per cent of people in Britain do not believe in a wealth tax, because a tax on wealth is a tax on housing.

Working class people in Peckham have houses worth £800,000 to 1mn which they bought 20 years ago, 30 years ago. There's no popular support for taxing housing wealth, yet that's where the wealth is. Honesty is required in all the elements of our conversation about politics.