Why the Tories should be terrified of Labour’s tax policy

The Conservatives like to attack the Labour Party of their dreams – one which would go on a tax-raising, borrowing and spending binge – but Keir Starmer and Reeves stubbornly paint a very different picture, writes Andrew Grice

Starmer’s economic policy hasn’t left the Tories with much room to manoeuvre, writes Andrew Grice. But the electorate deserves honesty above all else (Getty Images)

Rachel Reeves’ decision to rule out a wealth tax has increased the pressure on Rishi Sunak to reduce taxes. The Conservatives like to attack the Labour Party of their dreams – one which would go on a tax-raising, borrowing and spending binge – but Keir Starmer and Reeves stubbornly paint a very different picture. Ruling out an increase in capital gains tax and the top rate of income tax and the introduction of a “mansion tax” doesn’t fit the Tory script.

Right-wing Tory MPs are grumbling that Sunak’s government looks no different to Labour – as Reeves intended on tax, while insisting Labour has different spending priorities – and are warning that Sunak will have no chance of avoiding a general election defeat without putting “clear blue water” between the two parties on tax.

The problem: the fiscal outlook is even worse than when Liam Byrne, Labour’s outgoing chief Treasury secretary in 2010, unwisely left a note to his successor saying: “I’m afraid there is no money.” More immediately, Treasury officials are warning that tax cuts in Jeremy Hunt’s autumn statement in November could undermine the fight against inflation.