Margaret Hodge, anti-tax avoidance campaigner and Kendall backer. Photo: Getty Images
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Liz Kendall appoints Margaret Hodge to investigate Britain's £100bn tax relief bill

The Labour leadership has appointed the former head of the Public Affairs Committee and anti-tax avoidance campaigner Margaret Hodge to review the £100bn that Britain gives away in tax relief each year. 

Liz Kendall has announced a review into Britain's tax relief bill, potentially paving the way to massive reductions in the amount that the Treasury gives away in tax breaks.

The Labour leadership hopeful, who has described regaining the party's reputation for economic credibility as "the gateway to government", has appointed Margaret Hodge, the former chair of the Public Accounts Committee and a renowned tax avoidance campaigner, to look into the United Kingdom's £100bn annual tax relief. 

Although Kendall regards many of the tax breaks as vital to attracting investment to important sectors of the economy, including manufacturing and IT, she also believes that other reliefs are impossible to defend.

The Late Night Taxi Relief is a particularly egregious example: a tax break for people who work late hours and are given taxis home, paid for by their employers. Bankers and hedge fund traders regularly claim this tax break. But shift workers, night bus drivers, care workers and security guards are not entitled to claim the relief, as they are contracted to work unsocial hours. Between 80 to 90 per cent of the relief is claimed by city firms. 

The Kendall campaign also hope to highlight the rise in tax relief under the Conservative-led government, in contrast to the cuts to tax credits and the ongoing public sector pay freeze. Over the last five years, tax reliefs rose from 5.5 per cent of GDP to six per cent of GDP, while the cost of working age welfare fell from 5.7  per cent of GDP to 5.2 per cent. Even a reduction to 2010 levels would generation £10 billion for the Treasury, while the combined £100bn cost is greater than that paid to the NHS.)

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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Labour's trajectory points to landslide defeat, but don't bet on a change at the top any time soon

The settled will among Jeremy Corbyn's critics that they need to keep quiet is unlikely to be disrupted by the result. 

Labour were able to tread water against Ukip in Stoke but sank beneath the waves in Copeland, where the Conservatives’ Trudy Harrison won the seat.

In Stoke, a two-point swing away from Labour to the Tories and to Ukip, which if replicated across the country at a general election would mean 15 Conservative gains and would give Theresa May a parliamentary majority of 40.

And in Copeland, a 6.7 per cent swing for Labour to Tory that would see the Conservatives pick up 52 seats from Labour if replicated across the country, giving them a majority of 114.
As the usual trend is for the opposition to decline from its midterm position at a general election, these are not results that indicate Labour will be back in power after the next election.. That holds for Stoke as much as for Copeland.

The last time a governing party won a by-election was 1982 – the overture to a landslide victory. It’s the biggest by-election increase in the vote share of a governing party since 1966 – the prelude to an election in which Harold Wilson increased his majority from 4 to 96.

To put the length of Labour’s dominance in Copeland into perspective: the new Conservative MP was born in 1976. The last Conservative to sit for Copeland, William Nunn, was born in 1879.

It’s a chastening set of results for Ukip, too. The question for them: if they can’t win when Labour is in such difficulties, when will they?

It’s worth noting, too, that whereas in the last parliament, Labour consistently underperformed its poll rating in local elections and by-elections, indicating that the polls were wrong, so far, the results have been in keeping with what the polls suggest. They are understating the Liberal Democrats a little, which is what you’d expect at this stage in the parliament. So anyone looking for comfort in the idea that the polls will be wrong again is going to look a long time. 

Instead, every election and every poll – including the two council elections last night – point in the same direction: the Conservatives have fixed their Ukip problem but acquired a Liberal Democrat one. Labour haven’t fixed their Ukip problem but they’ve acquired a Liberal Democrat one to match.

But that’s just the electoral reality. What about the struggle for political control inside the Labour party?

As I note in my column this week, the settled view of the bulk of Corbyn’s internal critics is that they need to keep quiet and carry on, to let Corbyn fail on its his own terms. That Labour won Stoke but lost Copeland means that consensus is likely to hold.

The group to watch are Labour MPs in what you might call “the 5000 club” – that is, MPs with majorities around the 5000 mark. An outbreak of panic in that group would mean that we were once again on course for a possible leadership bid.

But they will reassure themselves that this result suggests that their interests are better served by keeping quiet at Westminster and pointing at potholes in their constituencies.  After all, Corbyn doesn’t have a long history of opposition to the major employer in their seats.

The other thing to watch from last night: the well-advertised difficulties of the local hospital in West Cumberland were an inadequate defence for Labour in Copeland. Distrust with Labour in the nuclear industry may mean a bigger turnout than we expect from workers in the nuclear industries in the battle to lead Unite, with all the consequences that has for Labour’s future direction.

If you are marking a date in your diary for another eruption of public in-fighting, don’t forget the suggestion from John McDonnell and Diane Abbott that the polls will have turned by the end of the year – because you can be certain that Corbyn’s critics haven’t. But if you are betting on any party leader to lose his job anytime soon, put it on Nuttall, not Corbyn.

 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.