Can Rachel Reeves be trusted not to bring in a wealth tax?

The government is briefing that Rachel Reeves is ruling out a wealth tax, and won’t surrender to pressure from the left on the Labour backbenches to raid the assets of the rich. It will only accelerate the exodus of the wealthy from the UK, they say. It won’t raise any serious money. And just about every other country that has tried it has had to abandon it. That may reassure a few millionaires anxiously scanning property websites in Dubai and the Caribbean. But there is just one catch: the Chancellor has broken every other promise she has made so far – so why not this one as well? 

The spin could hardly be clearer. Lord Kinnock, the former Labour leader who in many ways still speaks for the soul of the party, may have backed a wealth tax, suggesting a 2 per cent annual levy on fortunes over £10 million, and it may have been backed by an increasing number of MPs. Even so, the Chancellor is standing firm. She is not going to go anywhere near it. It will damage the economy too much, and countries such France, Ireland and Denmark have tried wealth taxes and quickly concluded that they don’t work. The only reason Reeves is not ruling it out in public, apparently, is because taxes such as a capital gains tax, which could be construed as a levy on wealth, may go up, and she doesn’t want to be boxed in. The better-off can breathe a sigh of relief. It is not going to happen. 

But why would anyone believe Reeves any more? She told us she was going to scrap the winter fuel allowance, but reversed that after losing a by-election. She told us she was going to reform welfare, but caved in to pressure from the left of her party. She told us she was not going to raise taxes on ‘working people’ but raised them on employer’s National Insurance instead, which amounts to the same thing. And she told us her tax rises last autumn would not be repeated, but now it is clear she will raise them again in October. The list goes on and on. Reeves shamelessly breaks every promise she makes. It is hard to understand why this one will be any different. 

With the fiscal mess getting worse and worse, Reeves will almost certainly have to break her election pledge not to raise any of the three main taxes. A 2 per cent increase in either the basic rate of income tax or VAT is the only real way to bring in the money she needs. And yet, with ordinary working people forced to pay more, surely the left will demand a wealth tax in the interests of ‘fairness’ and ‘social justice’? Against that backdrop, it may be the only way to hold the party together. Reeves can spend the summer briefing that is not going to happen – but she is no more likely to keep that promise than any of the others.