19 November 2025

Keir Starmer could yet save himself

If only his Chancellor would explain taxes

When you don’t know what a government is trying to do with power, take a look at its tax policy. Because nobody knows what this government is trying to do, everybody is looking.

The long run-up to the Budget should have been a blessing, offering Keir Starmer and Rachel Reeves respite from their usual reactivity and self-defence. This was the time to write the headlines. But the cycle carried on as usual, with leaks and briefings turning November into a political bonfire.

I hold the unfashionable view that Labour can still douse the flames if it could only explain why we pay tax and what taxes we should pay without referencing headroom or black holes. Fiscal choices rest on ideas of interrelatedness. These supply the motivating goal for any tax change, even (or especially) when dressed as economic truths. In rocky times like these, should we deepen our reserves of mutuality (increase tax) or choose survival of the fittest (cut spending)?

Raising tax requires public acceptance, but reducing it does not. A shrewd move of the surrendered Sunak government was to take four pennies off National Insurance, daring Labour to make an argument. Reeves has not. That’s a missed opportunity, not a dodged obstacle.

Democratic politics depends on the idea that most of us can be convinced to see our interests and objectives differently. At some point this century everyone except Nigel Farage forgot this – he has made a career of turning minority opinion into majority. Labour must recover faith in its capacity to unify and universalise concerns if it’s to construct new majorities in a time of so many antagonisms. There are good reasons to increase tax, which reframe individual burden as common cause.

The largest revenue-raiser at the Budget will be changes to income tax, despite the Chancellor abandoning plans to increase its basic rate. Her covert approach may avoid manifesto-breaking mutiny but will make the tax less progressive (by shifting receipts on to low and middle earners) and squander a chance to roll out the collectivist national project invoked in the Prime Minister’s conference speech.

The taxes most of us pay fund the things most of us want: schools and hospitals; roads and railways; military and financial protection. This is democracy’s most impressive child. Its key aspect is mass participation: we all pay, we all use. We’re free to want more public services and protections than we had in the past, or what our counterparts in other countries want. Which is to say historical and international comparisons, ever-present in tax debates, miss the point. They take ordinary taxes out of the context of what Britons want and need, now and in the future.

There are also good reasons to increase taxes that only some people pay, but they have nothing to do with public services. Most of us make most of our money by actively employing our hands, heart or head. By contrast, landlords, rentiers and people who passively invest in index funds – which now control more assets than active stock-pickers – collect income without exertion or sacrifice. In 1907, the Liberal chancellor Herbert Asquith felt it was “flying in the face of justice and common sense” to tax earned and unearned income equally, imposing a higher rate on the latter. Over a century later, we do the opposite, even as returns on owning once again outstrip returns on earning.

Two decades of asset inflation and wage stagnation are reanimating discussions on taxing stocks of wealth, not just flows of income. The Italian government is weighing up a tax on gold jewellery while France is in lively debate about families worth more than €100m. In Britain, taxes on gains made from selling and inheriting assets were increased last year, although only slightly.

These changes have been rationalised by politicians who point to rising deficits. Instead they should have explained that social conditions have increased the value of gold, stocks and houses, and so some of the gains are naturally society’s. Such an argument could engender broad support from the public, as was the case with taxing oil and gas companies after Russia’s invasion of Ukraine. If the Chancellor introduces a new levy on multimillion-pound homes, as is widely expected, she should ask the affected why they think their house prices doubled since the financial crash.

And so, Ed Miliband’s floated mansion tax when he was leader may have been an idea ahead of its time. But what our moment really needs is a new generation of statecraft thinkers like his father, the sociologist Ralph Miliband. That nobody trusts the government to spend their money well is part of a wider crisis of state legitimacy that includes people seeking asylum in hotels, everything becoming relatively expensive and the strange disappearance of half the electorate at the last general election, in which only one in two adults voted.

Whether they want to or not, Labour must reopen a debate about the role and nature of the state. While the right is thinking in grand, cynical terms, the left seems imprisoned by a view of the state as a share of GDP. Unless the left widens the aperture from basic tax-and-spend to a state that also instigates and distributes growth, binds the people into a nation and sets rules that share power and dignity, the future will belong to strongmen. It has been half a century since we dared increase income tax or developed new theories of statecraft. If not now, when?

[Further reading: Meet the bond market vigilantes]