Who is Labour’s main opponent now? There’s Reform, which has led every UK opinion poll for almost seven months. There’s an improving Kemi Badenoch who will respond to the Budget tomorrow. And then there’s the Greens – who have drawn almost level with Labour and are now winning 20 per cent of the party’s 2024 voters, far ahead of the Liberal Democrats on 11 per cent and Reform on 10 per cent.
The question of what a Green Budget would look like is more relevant than it has ever been, so I asked Zack Polanski, the “eco-populist” who has transformed his party’s standing since becoming leader in September. “We need to challenge inequality, so that starts with a wealth tax on assets: a 1 per cent tax on £10m or more and a 2 per cent tax on £1bn or more,” he said.
“Yes, that will raise revenue but more importantly it’s about reducing inequality: a small group of people are hoarding assets, which is making life difficult for everyone else and we need to rebalance power and wealth.”
The standard critique of a wealth tax is that it would not work. Of the 12 OECD countries that had such a policy in 1990, just three have one now (Norway, Spain and Switzerland). “Almost all raised a pittance, hit the middle class more than the ultra-wealthy and were abolished,” the tax expert Dan Neidle has warned.
But Polanski, who would also equalise capital gains and income tax rates, dismissed such objections. “The Duke of Westminster owns half of Mayfair, he can’t just pick it up and move it. But if someone is so fundamentally opposed to contributing to this country and our public services at a time when so many of them are broken because we’re asking for 1 per cent of assets over £10m then I don’t think that’s someone who should feel particularly welcome in this country anyway.”
What of income? As I noted last month, the UK became a country of high taxes for the few and low taxes for the many during the Conservative years. While earnings over £100,000 are taxed at a marginal rate of 62 per cent, the average worker pays less than their counterparts in social democratic Europe and those in free-market America (with an effective rate of just 19 per cent). An unbalanced tax system, by this account, has accelerated the decline of Britain’s public realm.
“In the long term, people probably do need to pay more tax,” Polanski conceded when I raised this point. “So we’re looking at a situation that’s more like western Europe or some of the Scandinavian countries where we have better public services and everybody contributes a little bit. But we’re not in the place to have that conversation at the moment because of the deep inequality I keep talking about.”
The charge that Polanski will face is that the Greens’ tax plans would not fund their promise of a £160bn rise in day-to-day spending. Would he adopt fiscal rules to reassure the markets?
“The fiscal rule we need to have is to make sure that inflation doesn’t go higher than the skills and resources that we have in our economy,” he replied. It’s an argument reminiscent of modern monetary theory (MMT), which argues that inflation is the only real restraint on countries such as the UK that can issue their own currency (and which mainstream economists often dismiss as “voodoo economics”).
“MMT is a descriptor of an economic system but actually what I’m more interested in is what’s happening to cleaners, teachers, nurses and those everyday things rather than being caught up in economic theory,” Polanski said, deploying the unashamedly populist rhetoric that has fuelled his advance.
Confronted by insurgents to her left and right, Rachel Reeves’ riposte is that only Labour offers a programme that is both radical and credible.
“When you look at the distributional analysis you’ll see this is a Labour Budget, a progressive Budget,” she told a Parliamentary Labour Party meeting last night, while warning that it would be “a package, not a pick-and-mix”.
But the risk for the Chancellor, as Polanski offers red meat to progressives, is that her “smorgasbord” ends up looking paltry.
This piece first appeared in the Morning Call newsletter; receive it every morning by subscribing on Substack here
[Further reading: Europe’s victim complex]
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