Are Labour’s Policy Decisions Biased Against Those Who Traditionally Don’t Support Them ?

 The direction of travel indicated by the new Labour government’s policy decisions since July has left a significant question in the minds of many of us:

“Are they based solely on a desire to get the country moving again after a period of stagnation, or is there a large element of vindictiveness against those who traditionally have not supported Labour ?”

Firstly, why is this question important, given that Labour is unlikely to be challenged in a General Election again before 2029 ?

It’s because the answer will determine whether we do actually manage to dig ourselves out of the slippery economic and social ‘pit’ we’ve fallen into, or just keep slipping back down the sides, again and again….it’s also precisely because the new government is so unchallengeable from a parliamentary point of view that we need to know the true nature of their motives. This may help us to predict what is to come.

Let’s look at the evidence we have so far.

The principal decisions made since taking office that have attracted most controversy, together with their introduction and implementation dates,  have been:

1)       * Abolition of the Pensioner Universal Winter Fuel Payment (July 24-immediate)

2)       * Major increase in Employer NI contributions (Budget-immediate)

3)       * Abolition of Agricultural IHT exemption and imposition of new 20% tax on all assets over £1M (Budget-from Apr 26).

4)       * Imposition of VAT on private school fees (budget-from Jan 25).

The justification given for each of these measures has always been that they are needed to fill the so-called ‘Tory Black Hole’, which seems to have varied between £9M and £40M since July (see previous blog for a closer examination of the various claims). 

Reeves and Starmer have both been careful to wave aside the many accusations of bias and vindictiveness that have already been made against them. The fact remains that all 4 measures have been directed primarily against groups of electors who traditionally don’t support Labour. One or two might be ascribed to coincidence, but all four…?

The problem that the leadership now have is that in alienating pensioners, aspiring middle class parents, private industry and farmers in one fell swoop, they have destroyed their popularity with the bulk of the electorate, and have also created major divisions within their own party. 

The Unite union were studiously ignored when they managed to pass a Conference resolution to reinstate the Winter Fuel payment, and are still smarting from the indignity. The farming community are up in arms about the threat to their livelihoods from IHT imposition and are making their MPs well aware of it. They even went as far as driving their tractors to Downing Street in protest last weekend, and they will never forget Starmer's 'treachery' as they see it in reneging on his pre-election promise to them. 

Many small businesses, especially within the hospitality sector are in despair about their financial viability following the NI increase and the rise in the minimum wage. The CBI have condemned Reeves’ strategy and quite rightly point out that Labour has effectively ‘shot itself in the foot’ regarding its own flagship growth strategy, by forcing businesses to put a hold on new recruitment and investment. Their ‘stony silent’ reception of Reeves’ address to them yesterday speaks volumes; her assertion that this budget would never be repeated will have been taken with the ‘large pinch of salt’ it deserved. There are reports of splits within the Labour party and even in the cabinet on the wisdom of all 4 decisions (particularly since many of the new Labour MP intake will have elderly relatives and will no doubt be quietly sending their offspring to private schools !).

Given all this, we have to ask the question “Do the leadership really know what they are doing, or is this just a political and economic ‘revenge fest’ they are taking the opportunity to indulge in…while they still can ?”. Either way, things don’t look good for the UK economy or our social cohesiveness.

To answer the competence question, we need to look at what each of the 4 measures above is actually likely to achieve from a revenue generating point of view.

Winter Fuel: Means testing the Winter Fuel payment was initially estimated to save DWP ca £2Bn. However, minimal assessment of its potential consequences was made before introduction, and this has already generated numerous petitions to re-instate universality and a legal challenge in the courts. 

Not long after the inital furore erupted in July, we heard that DWP had estimated that 880,000 potential recipients of Pension credit had not yet claimed, and were being actively encouraged to do so. This was a clear knee-jerk attempt at mitigation, but failed miserably. It also emerged that each successful claimant could expect up to £4000 p.a. in extra untaxed income. Some simple arithmetic should be sufficient to convince us that even if only half of the potential claimants actually claimed successfully, the total extra bill to the treasury would be £1.76Bn, thus negating the bulk of the revenue gain. Result: 10 million pensioners (i.e. ca 20% of the electorate) alienated…for peanuts. 

Age Concern’s own impact survey identified ca 50,000 pensioners who would be catapulted into fuel poverty by the move and DWP themselves now admit 20,000 may have to make the choice between heating and eating this winter. If the courts rule against in the New Year, Reeves may yet be forced to reinstate the universal payment, with the Pension Credit bill increase remaining in place. Result: loss of up to £2Bn. 

An own goal if ever there was one….(Score: Starmer, 0; Others United, 1)

NI increase: Putting exact figures on the financial loss to the treasury from a loss in tax revenue from inhibition of business sector growth is complex, but the loss of tax and NI revenue alone from workers who are not employed as a result of the NI and minimum wage increases will be substantial. The benefits bill will also rise as a result of increased unemployment, just at a time when we really do need people back at work following the Covid exodus. Starmer’s well-publicised initiatives to ‘get people back to work’ will look particularly hollow if there are no jobs to get them into….

More importantly, perhaps, holding back the economy will also deter inward investment in UK plc, and discouragement of UK business investment in new tech will likely also make us less competitive with the rest of the world. Another substantial ‘own goal’ for Labour, then. (Score: Starmer, 0; Others United, 2)

Private School fees & VAT: Although this measure will bring in quite a bit of extra revenue in the short term, and some of the smaller schools may go to the wall, like the other measure discussed,  it will stimulate the inventiveness of the 'victims' - in this case parents and school managers alike. No doubt alternative ways of allowing money to change hands will be found, and an under-resourced HMRC will be kept busy trying to identify and shut down any perceived loopholes. The British public, and particularly the better off section of it, are quite adept at hanging on to their cash, especially when their offspring’s education is at stake. Starmer will find that the ‘wrath of middle England’ is likely to catch up with him over this…and sooner rather than later. Last but not least, no extra provision seems to have been made to expand the state school sector, with its crumbling real estate and overcrowded classrooms, to take in all those ‘private school refugees’. (Starmer, 0; Others United, 3)

And what about IHT and the farmers ?

Despite Reeves’ protests to the contrary, this new tax will affect many of our smaller farms, given the rapid increase in land values in recent years and the fact that many of them are ‘asset rich and income poor’. It will probably be the last straw for many of our small family farms where the owner is nearing retirement age (or indeed beyond it); many will probably take the easy option and sell up altogether. Some of the land released may be absorbed by larger agricultural ventures and continue to be productive,  but a large proportion of it is likely to go out of production, either end up as re-wilding projects or, worse still, as solar farms or under concrete as housing estates. This is at a time when it even more crucial for UK to aim for food self-sufficiency. Why is this important ?

We live in a geo-political climate which has rarely been more febrile and uncertain. Food ‘shocks’ leading to cost of living crises of the type caused by Ukraine can be expected at any time, and the last thing we need now is to become totally dependent on food imports. Labour seem to be obsessed with green energy introduction, but doing so without that all-important fossil fuel ‘buffer’ that we'll need for when the ‘sun doesn’t shine and the wind doesn’t blow’ is folly. This combination of policy errors probably represents the biggest ‘own goal’ of the lot, and the combined effects could be disastrous. Add to it our outdated IT infrastructure, which is subject to incessant Russian and Chinese cyber-warfare, and you have a serious recipe for the breakdown of order….

Another less well appreciated consequence of Reeves’ agricultural IHT decision is that it may well push those with substantial wealth who are not farmers to seek alternative strategies for IHT avoidance, including removing their money from UK jurisdiction altogether. The amount netted by the treasury from 40% on all estates valued at above £325k is much more substantial, thus the actual extra revenue generated by the removal of the current agricultural IHT exemption may well be substantially exceeded by the loss of IHT from large estates who take more aggressive steps to avoid the tax. (Final score: Starmer, 0; Others United, 4).

Conclusion: Although we await further developments to see if the trend continues, there’s little doubt in my mind that a) Labour’s policies are biased against those who don’t support them and b) their inexperience and lack of foresight is leading them to make some ill-thought out and often downright risky policy decisions, which may adversely affect us all….

It’s not hard to see where all this is coming from. Starmer’s current dominance over party policy no doubt stems from his own personal biases, and a desperation to show himself as a strong leader. He was extensively ridiculed as weak and vacillating as opposition leader in the media and this will be an important driver. Although his close acolytes still remain loyal, his cabinet already appears split on many issues, as is the party, although no one has yet plucked up the courage to present a direct challenge to his authority. His old enemy, Momentum, are still waiting in the wings, though, and will no doubt strike whenever they feel the time is right.

The only real beneficiaries from the budget measures would seem to be the public sector, whose workers will be substantially better off. Will this benefit the economy ? Sadly, probably not. However much you 'beef-up' public sector provision, you cannot generate the increased wealth our economy needs to prosper in a capitalist world from the public sector alone, since its role is essentially to help keep things running - private industry and enterprise is essential for development and expansion, as is inward investment.

Electors in substantial numbers are obviously already getting worried at the course of events, and a petition calling for a new general election has emerged and has already chalked up nearly 3 million signatures. Starmer appears remarkably unconcerned, and was almost derisive about it in his comments to the press yesterday, saying he “wasn’t surprised”. He obviously thinks his ‘super majority’ makes him immune from any adverse fallout….time will tell whether this is actually the case. Even if he does last the full 5 years, on present performance, I would rate his chances of a second term as virtually nil. The party will realise eventually that he is a liability, and will probably emulate the Conservative’s own ‘leadership management strategy’ and topple him, probably well before 2029.

I would recommend anyone who is concerned about the medium and long term future of UK plc, as I am, to sign the petition – it’s currently the only effective avenue we have to register our views. Even if Starmer isn’t listening, his party and his new MPs will be.....

First published 26.11.24