DANIEL HANNAN: Why are Labour losers Kinnock, Brown and Miliband still calling for the soak-the-rich policies that have failed time and again?
How very generous of Neil Kinnock. The former Labour leader wants to lift the two-child benefits cap. No doubt he imagines urchins around the land tossing their grubby caps in the air.
Labour seems inclined to take his advice and Reform is demanding the same thing, leaving only those mean-minded Tories to oppose the extra spending. (Boo! Do they hate children or something?)
There’s just one problem. Lord Kinnock is not proposing to fund the rise himself. Not even a former European Commissioner’s pension would cover the £3.4billion that the Institute for Fiscal Studies says it will cost.
No, he wants taxpayers to pay. How odd that his approach – sticking others with the bill – should be seen as compassionate.
And how odd that the Conservatives, who are standing up for taxpayers – most of whom will never thank them – are in the doghouse.
It is a measure of the sheer uselessness of the current Labour Government that it has handed so much initiative to its economically illiterate Left-wing backbenchers.
And, also, to former leaders such as Kinnock and Gordon Brown – another Labour grandee now demanding the two-child cap be scrapped.
Then there’s Ed Miliband, shaking out the national piggy bank with wild abandon into the big black hole marked Net Zero.
Lord Kinnock is not proposing to fund the rise himself. He wants taxpayers to pay. How odd that his approach – sticking others with the bill – should be seen as compassionate
None of these former leaders ever won an election. And they all have the luxury of not having to worry about how the books balance.
Yet for a Government, child benefit is not simply a measure of warm-heartedness. It is a question of how to allocate limited resources.
In other countries, the benefits bill rose during the lockdowns and then fell back. Here, it has continued to rise – from £244billion a year in 2020 to £303billion today, adjusting for inflation.
If, like Lord Kinnock, you want to accelerate that rise yet further, you need to explain where you would make alternative savings.
Releasing criminals from their expensive prison cells? Halving our defence budget? Shrinking the NHS? It won’t do to stick your fingers in your ears and sing, ‘I’m just a soul whose intentions are good’. Politics involves trade-offs.
Can we borrow the money? No. In the current financial year, public sector net borrowing is £151.9billion, up £20.7billion on last year. Incredibly, around two thirds of that is going on servicing past debt – not on repaying it, simply on covering the interest.
What about extra taxes, then? Well, we have already tried that. The pandemic saw a torrent of what was supposed to be emergency spending. But it proved much easier to spin the taps open than to screw them shut again.
Labour inherited the highest tax rates in 70 years. But, instead of seeking to bring spending even vaguely closer to where it had been in March 2020, it chose to push taxes even higher.
Gordon Brown is another Labour grandee now demanding the two-child cap be scrapped
Has revenue risen in consequence? Somewhat, at least in the short term. If you suddenly make a grab for extra cash through, say, higher National Insurance contributions, you get a one-off sum.
But people then amend their behaviour in ways that often mean you end up with less in the longer run. Thanks to the National Insurance rises, for example, many employers can no longer afford to hire so many staff.
Unemployment is now at its highest since lockdown and, as Angela Rayner’s calamitous Employment Rights Bill comes in, it will rise higher still.
Unemployed people do not pay into the system. They draw from it. A short-term boost in revenue quickly turns into a long-term drain. The same is true of the taxes on non-doms, VAT on school fees, the inheritance tax raids on farmers and the rest.
Leftists, in my experience, rarely acknowledge this problem. It is not that they weigh the evidence and reject it. They simply ignore it. What matters to them is being seen to mean well.
If pushed, they say there should be a wealth tax. They almost never explain what they mean by a wealth tax, and I am not sure they know themselves, beyond a general sense that ‘the rich’ or ‘the top 1 per cent’ must pay.
Sure enough, this is Lord Kinnock’s preference. ‘I know it’s the economics of Robin Hood, but I don’t think there is anything terribly bad about that,’ he declares.
Except that Robin Hood did not add a single silver penny to the economy of 12th century Nottinghamshire.
Then there’s Ed Miliband, shaking out the national piggy bank with wild abandon into the big black hole marked Net Zero, writes Daniel Hannan
If, for the sake of argument, we take the stories about him literally, his depredations would have discouraged merchants from using the roads around Sherwood Forest, reduced trade and investment and, as rents for the aristocracy and the church fell, pushed up taxes on ordinary people.
In Robin Hood’s time, you could reasonably claim that the rich were not paying their share. Yet today, according to His Majesty’s Revenue and Customs, the top 5 per cent of UK taxpayers pay 47.4 per cent of income tax, and the top 1 per cent pay 26.6 per cent.
Instead of harassing high earners, we should harbour them as geese that lay golden eggs. They are already subject to a number of wealth taxes, by the way, including VAT on school fees, capital gains tax, inheritance tax and stamp duty on shares.
These are among the least efficient levies, often raising little or nothing once their administrative costs are added to their secondary wealth displacement.
If you are largely motivated by envy rather than by the true desire for revenue, of course, none of this much matters.
Nor will you care that, as the tax consultant Dan Neidle (a Labour supporter) recently explained, the wealth tax being pushed by Labour backbenchers would get 80 per cent of its revenue from just 5,000 people, and 15 per cent from just ten individuals.
This means that the whole scheme would collapse if just a couple of dozen people boarded their Gulfstreams to friendlier jurisdictions.
Why do we engage in this wishful thinking?
I would love to be able to say it was entirely the fault of our politicians. Heaven knows, they deserve their share of the blame. But democracies usually get the representatives they deserve.
There is a reason Reform has come out against the child benefit cap. There is a reason it exults in the failure of Labour’s attempt to reduce the winter fuel allowance. It is following public opinion.
All too many of us want to believe that we can make the cuts we need without touching the big budgets: health, benefits and pensions.
Some pretend that the money can be magicked out of the rich, others that there are vast savings to be made in relatively tiny areas, such as foreign aid.
Both sides are telling voters what they want to hear.
The truth is that we need to grow up. We need to grasp that nations, like families, must live within their means.
We need to understand that bringing our budget into balance will mean losing some perks – including perks and benefits that we, personally, happen to receive. If we refuse to accept these things, we deserve the financial firestorm coming our way.
Lord Hannan of Kingsclere is president of the Institute for Free Trade
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