The pounds 34bn tax hikes Labour could impose

New research published today by investment bankers NatWest Markets presents a speculative but plausible list of tax increases adding up to nearly pounds 34bn which a Labour government could introduce within the lifetime of a parliament.

As Gordon Brown, the shadow chancellor, kicks off a long-awaited series of speeches about his tax and spending plans today, NatWest's City economists have begun to flesh out the detail of Labour's policies for themselves.

The list is headed by the windfall tax on which Mr Brown will focus in his speech. The amount the party plans to raise from this has crept up from about pounds 3bn originally to pounds 10bn now.

Despite a ferocious lobbying campaign against the tax, with opponents raising the spectre of a legal challenge, Labour is utterly determined to introduce it in order to fund its plans to get a quarter of a million of the long-term unemployed into work. The windfall tax is also that rare thing, a politically popular tax.

The authors of the NatWest paper, Geoffrey Dicks and John O'Sullivan, reckon the next most likely bets are raising the rate of corporation tax from 33 per cent to 35 per cent, and phasing out Miras, the tax relief on mortgage interest payments. Together these could raise more than pounds 4bn in a full year.

The UK has a relatively low corporate tax rate now, while strong profits mean the increase would raise a lot of revenue at this stage of the business cycle.

Labour could point out, the paper says, that the burden of putting the public finances on a sounder footing after the last election was borne entirely by individuals. A reversal of the [1991] cut in corporation tax would redress the balance, it says.

Abolishing Miras, the benefit of which has already been steadily reduced by successive Conservative chancellors, would end a subsidy to the housing market that economists have long criticised, at a time when booming prices mean the market would be able to bear it.

Getting rid of Miras would mean in effect increasing taxes on home-owners without breaking any pledges about not raising income taxes.

The list subsequently turns to more controversial measures, with the next three items amounting to income tax increases. Together, the three income tax measures could bring in more than pounds 6bn.

Ending the upper earnings limit on national insurance contributions would eliminate an untidy fall in the upward progression of marginal tax rates.

It would raise tax on middle and upper income earners, and could be packaged with Mr Brown's plans to introduce a 10 to 15 per cent income tax starting rate.

Phasing out the married couples' allowance, already restricted to 15 per cent by the Conservatives, and restricting relief on personal allowances to the basic rate of income tax, would also make the income tax system simpler and more progressive.

Tampering with income tax might appear to be too much of an electoral hot potato for these to be plausible candidates.

However, the paper recommends two possible corporate tax measures that appear to be closer to Labour's thinking.

One is the removal of tax relief on companies' interest payments, in order to end the tax system's encouragement of debt over equity finance.

The other is the withdrawal of the advance corporation tax credit. These could yield potentially huge revenues.

Finally, the authors consider the extension of VAT to private health and school fees and the introduction of motorway tolls as outside bets.

Suggested Topics
News
Jeremy Paxman has admitted he is a 'one-nation Tory' and complained that Newsnight is made by idealistic '13-year-olds' who foolishly think they can 'change the world'.
peopleThe idea has been greeted enthusiastically by the party's MPs
News
Michael Buerk in the I'm A Celebrity jungle 2014
people
Arts and Entertainment
Avatar grossed $2.8bn at the box office after its release in 2009
filmJames Cameron is excited
Voices
File: David Cameron offers a toast during a State Dinner in his honour March 14, 2012
voicesAnd nobody from Ukip said babies born to migrants should be classed as migrants, says Nigel Farage
PROMOTED VIDEO
Arts and Entertainment
Stik on the crane as he completed the mural
art
News
Happy in his hat: Pharrell Williams
people
Arts and Entertainment
Stella Gibson is getting closer to catching her killer
tvReview: It's gripping edge-of-the-seat drama, so a curveball can be forgiven at such a late stage
News
Brazilian football legend Pele pictured in 2011
peopleFans had feared the worst when it was announced the Brazil legand was in a 'special care' unit
News
i100(More than you think)
Sport
Brendan Rodgers seems more stressed than ever before as Liverpool manager
FOOTBALLI like Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
News
ebooksNow available in paperback
News
The Magna Carta
archaeologyContemporary account of historic signing discovered
News
Phyllis Dorothy James on stage during a reading of her book 'Death Comes to Pemberley' last year
peopleJohn Walsh pays tribute to PD James, who died today
Sport
Benjamin Stambouli celebrates his goal for Tottenham last night
FOOTBALL
Life and Style
Dishing it out: the head chef in ‘Ratatouille’
food + drinkShould UK restaurants follow suit?
News
peopleExclusive: Maryum and Hana Ali share their stories of the family man behind the boxing gloves
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Argyll Scott International: Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Argyll Scott International: 2x Service Desk Analyst

£20000 - £22000 per annum: Argyll Scott International: Service Desk Analyst Re...

Recruitment Genius: Senior Execution Trader

£30000 - £250000 per annum: Recruitment Genius: A global Rolling Spot FX, Comm...

Citifocus Ltd: ACA - Financial Reporting

£Attractive Package: Citifocus Ltd: Chartered accountant (ACA or CPA), must be...

Day In a Page

Homeless Veterans Christmas Appeal: ‘We give them hope. They come to us when no one else can help’

Christmas Appeal

Meet the charity giving homeless veterans hope – and who they turn to when no one else can help
Should doctors and patients learn to plan humane, happier endings rather than trying to prolong life?

Is it always right to try to prolong life?

Most of us would prefer to die in our own beds, with our families beside us. But, as a GP, Margaret McCartney sees too many end their days in a medicalised battle
Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night - is that what it takes for women to get to the top?

What does it take for women to get to the top?

Thomas Cook's outgoing boss Harriet Green got by on four hours sleep a night and told women they had to do more if they wanted to get on
Christmas jumper craze: Inside the UK factory behind this year's multicultural must-have

Knitting pretty: British Christmas Jumpers

Simmy Richman visits Jack Masters, the company behind this year's multicultural must-have
French chefs have launched a campaign to end violence in kitchens - should British restaurants follow suit?

French chefs campaign against bullying

A group of top chefs signed a manifesto against violence in kitchens following the sacking of a chef at a Paris restaurant for scalding his kitchen assistant with a white-hot spoon
Radio 4 to broadcast 10-hour War and Peace on New Year's Day as Controller warns of cuts

Just what you need on a New Year hangover...

Radio 4 to broadcast 10-hour adaptation of War and Peace on first day of 2015
Cuba set to stage its first US musical in 50 years

Cuba to stage first US musical in 50 years

Claire Allfree finds out if the new production of Rent will hit the right note in Havana
Christmas 2014: 10 best educational toys

Learn and play: 10 best educational toys

Of course you want them to have fun, but even better if they can learn at the same time
Paul Scholes column: I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season

Paul Scholes column

I like Brendan Rodgers as a manager but Liverpool seem to be going backwards not forwards this season
Lewis Moody column: Stuart Lancaster has made all the right calls – now England must deliver

Lewis Moody: Lancaster has made all the right calls – now England must deliver

So what must the red-rose do differently? They have to take the points on offer 
Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

Cameron, Miliband and Clegg join forces for Homeless Veterans campaign

It's in all our interests to look after servicemen and women who fall on hard times, say party leaders
Millionaire Sol Campbell wades into wealthy backlash against Labour's mansion tax

Sol Campbell cries foul at Labour's mansion tax

The former England defender joins Myleene Klass, Griff Rhys Jones and Melvyn Bragg in criticising proposals
Nicolas Sarkozy returns: The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?

Sarkozy returns

The ex-President is preparing to fight for the leadership of France's main opposition party – but will he win big enough?
Is the criticism of Ed Miliband a coded form of anti-Semitism?

Is the criticism of Miliband anti-Semitic?

Attacks on the Labour leader have coalesced around a sense that he is different, weird, a man apart. But is the criticism more sinister?
Ouija boards are the must-have gift this Christmas, fuelled by a schlock horror film

Ouija boards are the must-have festive gift

Simon Usborne explores the appeal - and mysteries - of a century-old parlour game