Taxing times for Labour: LEADING ARTICLE

A generation ago under Harold Wilson, devaluation was the great unmentionable for Labour. For Tony Blair, compulsory mouth-washing is ordered for anyone who mentions the "T" word, taxes. John Smith, so party lore has it, lost the 1992 election for Labour by promising increases in income tax and National Insurance. This time round the fiscal silence has been deafening. You have to listen very hard to hear any Labour tax talk. What is audible is moderate in the extreme. Most of the taxpaying population will sleep easy if Blair is voted into Number 10.

It seems, therefore, strange that KPMG should be telling its clients hair-raising tales of Tony's terrible tax take and telling them to decamp, or dispatch their funds, to foreign climes. KPMG is a reputable firm of accountants and consultants. It has prospered under the Tories and probably would do so under Labour. Either KPMG has had sight of deeply socialistic schemes unknown to the rest of us or it is engaging in scare tactics that leave it looking like Conservative Central Office's errand boy. This is an odd position for a company that recently published a damning calculation of the tax burden under the Tories.

Anyone with assets or the prospect of a future income stream should plan. Planning includes anticipating taxes and may require shifting money between portfolios. But telling clients to plan for dramatic tax scenarios that bear no relation to Labour's stated policies is bad advice.

Gordon Brown has hung the credibility of a Blair government on spending restraint. The lack of spending commitments around the Shadow Cabinet makes several cherished Labour policies look distinctly threadbare. Under the guise of tax reform, certain rates would probably rise. There could be a new top rate of 50 per cent. Inheritance tax would probably weigh heavier. Labour's proposed windfall tax on the privatised utilities would hurt shareholders. But this is not revolution. Do such plans justify KPMG's exaggerated advice to taxpayers? No, Labour is now squarely in the fiscal mainstream.

KPMG's advice runs the risk of partisanship; it is also painfully limited. Where is the mention of what Labour's policies might do for business and investment, to stock market values, to the real economic context within which income is earned and savings fructify? It might be too much to expect that tax advisers should be telling their clients that, whoever wins the next election, vexing questions about skills and jobs and social division will have to be addressed. But surely even KPMG is obliged to remind its clients that there are such principles as fairness and proportionality. Their application does not justify a headlong flight by higher-rate taxpayers.