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IEA - Labour Party manifesto pledges would impose largest tax burden since the 1940s
Reaction to official Labour Party manifesto launch
Commenting on the Labour Party’s manifesto, Julian Jessop, Chief Economist at the Institute of Economic Affairs, said:
“Advocating more government spending, more tax, more regulation, more state ownership and more state control of prices and wages shows a significant misunderstanding of the positive role of free markets in solving economic and social problems.
“The Labour Party’s proposals to dramatically hike taxes would raise the tax burden to the highest share of GDP since the 1940s. But their estimates of how much can actually be raised from corporations and the top 5% fail to take full account of the negative impact on the economy. It is workers, consumers and shareholders large and small who ultimately pay taxes, not companies. Such high rates of taxation will disincentivise work, discourage investment and reduce innovation, making it unlikely that Labour’s targeted £48.6 billion would actually be raised.
“Imposing higher levels of taxation on business goes against the current global trend, with more and more countries now cutting corporation tax. This sends a confused message as the UK prepares for Brexit. And imposing an additional tax to discourage ‘excessive salaries’ presumes that the state knows best and will put off the talented and highly skilled from coming to work in the UK.
“On spending, the Labour Party is ignoring the need for fundamental reform of the NHS in favour of another large and expensive sticking plaster, while offering billions in subsidies for students regardless of need.
“Labour’s proposals for various and un-costed renationalisations ignore several lessons from history. Nationalised industries are a substantial burden on the taxpayer and historically have provided terrible services. Their plans to bring utilities back into public ownership are unlikely to bring any lasting benefits to consumers but will cost a lot of money – especially energy and water.
“On top of this, they are planning to spend £250 billion over 10 years on infrastructure. The planned borrowing for this – and the cost of renationalisations – appears to take for granted that interest rates will remain low. Increased borrowing should also be concerning for younger generations who will be forced to pick up the bill.”
Notes to editors:
Relevent IEA publications
In 2014 the Institute of Economic Affairs published ‘Failure to Transform: High-Speed Rail and the Regeneration Myth’, which casts serious doubt on claims HS2 will regenerate the North. To download this please click here.
In 2016 the Institute of Economic Affairs published ‘Without Delay: Getting Britain’s Railways Moving’, which found abolishing Network Rail could save families £180 each year. To download this please click here.
In 2015 the Institute of Economic Affairs published ‘Britain’s Baker’s Dozen of Disasters: The UK’s thirteen worst economic policy mistakes since 1990’. To download this please click here.
Income tax increases
In 2016 the Institute of Economic Affairs published ‘Taxation, Government Spending and Economic Growth’, which called to abolish twenty taxes to improve and encourage economic growth. To download this please click here.
Corporation tax increases
In 2016 the Institute of Economic Affairs published ‘Why corporation tax should be scrapped’, which calls to bring capital taxation into the 21st century. To download this please click here.
Higher pay levy
In 2016 the Institute of Economic Affairs published ‘And how much do you earn? Public pressure for regulation of pay’, which finds political intervention in wage-setting risks damaging UK employment. To download this please click here.
In 2015 the Institute of Economic Affairs published ‘Flaws and Ceilings: Price controls and the damage they cause’, which explains why price controls are so damaging to our economy. To download this please click here.
In 2014 the Institute of Economic Affairs published ‘Flaws Universities challenged: funding higher education through a free-market ‘graduate tax’, which argues that a levy on graduate earnings should replace state funding of universities. To download this please click here.
The mission of the Institute of Economic Affairs is to improve understanding of the fundamental institutions of a free society by analysing and expounding the role of markets in solving economic and social problems.
The IEA is a registered educational charity and independent of all political parties.
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