[Robin McAlpine Blog] An employment ‘poll tax’ is bad policy and bad politics

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An employment 'poll tax' is bad policy and bad politics

On the face of it, the Starmer Government seems to me to have done something risky-going-on-mad by placing almost the whole burden of its tax rises on employment in what is a sort of workforce Poll Tax that will hit businesses according to whether they employ people and not whether they are making a profit.

Yet this was inevitable because, for all its noise and fury, the Starmer administration has no underlying theory of policy. It is one big theory of electoral campaigning which is proving deeply insufficient for governing. It is applying its campaign framing to the decisions you have to make in government, and that framing is leading it badly astray.

To understand this it helps to dissect the four key strands that make up the framing of Starmer Labour – I’m going to call them the Doppler Shift Wall, the Corbyn-Truss Morph, Grown-Upism and Blairstalgia. (Of course it is probably more accurate to call these McSweenyism.)

First, Starmerism used the concept of the Red Wall to discipline the party. Moving towards it it was ‘their people’, Labour’s base, a red shift. Moving back to its true urban heartlands of the big cities, Starmer Labour used voters in northern constituencies to justify social conservatism, a blue shift.

So a simple story is created in short words and capital letters; the Red Wall is made up of Working People and Working People don’t like Tax but Do like Public Services. So there needs to be public services without tax on workers. Let’s call that ‘One for the Sun‘.

But convenient stories like this don’t survive contact with reality. If you’re not taxing working people then you’re not taxing labour, but if you’re investing in public services you’re taxing something, and if it isn’t labour then it’s…

Capital. If you want to spend more on public services but you don’t want to tax labour you tax capital – wealth, profits, business, property, transactions, call it what you will, this is capital. Except the other big founding myth of Starmer-Labour is that somewhere in the darkness, just beyond the treeline, a monster prowls, a monster composed of the dismembered limbs of Truss and Corbyn.

I can’t tell you how central this Corbyn-Truss Morph is to Starmer Labour. To get the party membership to accept Starmer’s lurch to the right it needed more than to be disciplined with the need to win the Red Wall, the children needed to be scared by what lay beyond the trees.

They’d planned to sacrifice some popularity at this stage in return for happy markets but ended up with a shocking lack of popularity to sacrifice

For Starmer Labour, Corbyn explains why you don’t tax capital or income and Truss explains why you don’t borrow or cut tax. That’s really it. I wish I could tell you that the ideological positioning of Starmerism was more sophisticated than that but it isn’t, its a simple story with a hero and villains. In fact to emphasise the point they actually called their Doppler-shifting conception of a target voter a ‘Hero Voter’.

The problem with such an embarrassingly reductive ideology is that it really only offers you a list of things not to do and little clue as to what to actually do. That need is backfilled in Starmerism with something that manages to be even more reductive; Grown Upism. This was their codeword for technocratic bureaucratic managerialism which would restore ‘balance to the system’.

For Starmerism the problem with the Tory years wasn’t the economic policies but their chaotic implementation. By getting a grip on that, the problems would go away. I think it tells you a fair bit about how shallow Starmer’s politics is that a big swathe of his practical ideology can be summed up as ‘Hire Sue Gray’.

The problem is that technocratic bureaucratic managerialism is a growth-based ideology (it is an ideology and don’t let anyone kid you on otherwise) so requires a theory of growth. This is where the Blairstalgia comes in. What would Sue Gray have been technocratically managing if she wasn’t sleeping with the political fishes?

Market confidence. That’s it. That’s the growth theory of Starmer Labour. The last time Labour was in power it was easy so surely could be repeated. If you do what markets want you to do then they become ‘confident’ and therefore ‘stable’, and confident and stable are what every technocrat thinks a good market should be. You know, like in 2006.

That’s why Starmerites tell themselves the can’t tax capital – it’ll spook the markets. So they promised not to tax wealth or profits (let’s call that one for The Telegraph) or to borrow. How does this help? Because stable markets mean low interest rates and low interest rates mean household borrowing and private investment. Add in some planning liberalisation to super-charge the property market and you have…

The Blair Government. I mean, that is literally the strategy that worked for Blair. Keep markets happy by being brutal for a while and make a big play of how you’re beating up on the left of your party and then do whatever the financiers want until the Bank of England drops interest rates, a debt-fuelled consumer spree kicks off, the financiers go wild, the equity investors invest and then you just need to spend the tax receipts.

Except Starmer bottled it. This threadbare strategy relied on a generous honeymoon period like Blair had, yet Starmer got no honeymoon. They’d planned to sacrifice some popularity at this stage in return for happy markets but ended up with a shocking lack of popularity to sacrifice. I’m almost certain they had planned to cut much more than they did before their poll ratings freaked them out.

And this has all been done because Labour has trapped itself in a tiny, shallow little ideological corner in which their own theories of change clash and undermine each other

So, needing to tax something, why did they place everything on Employers’ National Insurance? Mainly because their own stupidity ruled out the other options. I’m sure they told themselves these tax rises are secretly like taxing capital without breaking any promises, and the backbenchers and the liberal commentators seem to be going along with this for now.

But this is absolutely not a tax on capital. It has little or no relationship to capital. I mean, one of the nation’s biggest increased tax bills will be care services while the increased tax bill for Edinburgh’s equity fund managers will be negligible. This tax has no relationship to the capital inherent in a business, only the size of its work force.

Think of it like a Employment Poll Tax. It is more regressive than Income Tax in that there are no higher bands, it’s the same proportion of wages paid for a cleaner and a chief financial officer. It has no relationship to an ability to pay; I know of a big, well-known charity which is already under financial duress which now faces an additional £30,000 tax bill which will probably send it under.

But the big rich, online retailers seem to have got rid of all their staff since you can now only talk to an AI chatbot, and AI chabots don’t get taxed. The impacts of this are going to be substantial. Businesses that could easily have afforded to contribute much more will be all but exempt from this move while many businesses on the edge of bankruptcy will be hit. Surely that’s a bad tax?

And in tax theory, it is generally taken as a bad idea to tax ‘good things you want to happen’, like job creation. It’s fine to do it a bit, but to turn that into the single £24 billion weapon in your arsenal is a big swing. It is taxing job creation and it is almost certain to lead to fewer new jobs and lower wages.

Meanwhile big opportunities have been utterly missed. Without going into it too much there is a major tax loophole that means private equity investors are just about the only people left who don’t pay income tax on their bonuses. Labour promised to fix that but bottled it in the face of the lobbyists. Likewise the gambling levy proposed by the Social Market Foundation which would have raised about £1 billion off the back of a tax on harmful, non-productive activity, also ducked.

This all seems like terrible politics to me. There are so many small and medium-sized businesses and large low-margin, large-workforce industries which are going to be disproportionately penalised by this. These are lots and lots of real voters and much of this is the kind of economy that takes place in people’s communities. There will be business failures and real unhappiness.

And this has all been done because Labour has trapped itself in a tiny, shallow little ideological corner in which their own theories of change clash and undermine each other. To not tax working people Labour has taxed their jobs, and they’ve done it so they definitely don’t tax capital or profits so that financial markets will bring borrowing costs down because that’s the whole plan, the whole purpose of government.

A purpose that government is pursuing like it is a game of Twister in which all the instructions are ‘don’t put your left foot on blue’ and ‘don’t put your right hand on red’. To navigate this, Labour is all but levitating, floating over a semantic morass of bad strategy trying to pretend that it is a successful way to govern and pissing off the many to please the few.

And the financial markets? They got the jitters and borrowing costs rose. Now we just need to wait for the job losses.

Source: An employment 'poll tax' is bad policy and bad politics