Sir Tony Blair is challenging Rachel Reeves’ potential tax hikes, as he argues that the Treasury was not making good use of taxpayers’ money. The former Labour prime minister believes that the top rate of income tax should be lowered to below 40%, which also goes against Sir Keir Starmer and the Chancellor. Speaking to the authors of a new economics book, Sir Tony said that income tax and National Insurance were extremely high.
He has suggested that taxes should be lowered in order to boost economic growth by incentivising Brits to work – especially if welfare reforms made it more difficult to claim benefits from the state. This comes as Ms Reeves is reportedly preparing to increase taxes again, as well as cutting spending, in the November Budget in order to plug the multi-billion pound black hole in public finances.
The Chancellor is expected to hit wealth creators in the UK by implementing a wealth tax on assets, claiming that “those with the broadest shoulders” should be footing the bill.
Despite the government saying that growth is the “number one mission” in the upcoming fiscal statement, Sir Tony believes the way to do this is not by raising taxes, but to cut them instead.
Speaking to the authors of Prosperity Through Growth, due to be published next week, the former prime minister agreed with economist Arthur Laffer who believes that governments can increase tax revenue by cutting tax rates.
“Even Sir Tony Blair, a Labour prime minister, argued that if you look at the levels of direct taxation for people, they’re really high, and in historical terms, they’d be considered extremely high, and people feel they’re getting taxed highly,” the authors wrote in the book.
“He pointed out that the state spends quite a lot of money, and the outcomes aren’t good. There is a real desire to untie the knot. And he thinks, in the future, we’ve got to end up with much lower rates of taxation.
“He concluded that the single thing that we could do to change the way people look at growth is around the taxation system and to re-educate people that there is a work incentive aspect to taxation that can’t be ignored.”
The authors added: “He also pointed out that the need for incentives meant also looking at the welfare system and that the economies that are emerging as successful are where they’re much more looking at taxation.”
The Telegraph has reported that Sir Tony also referenced the 40% higher rate of income tax being too high, despite keeping it at this level when he was prime minister.
Shadow Chancellor Mel Stride said that it is “telling that even Tony Blair admits what Conservatives have long understood”, which is that “punitive tax rates don’t raise revenue – they repel it”.