Labour manifesto targets wealthy even as Keir Starmer woos business

Sir Keir Starmer declared on Thursday that Labour was the “party of wealth creation” — but his manifesto targeted the wealthy for higher taxes, and will be carefully scrutinised for what it did not say.

Entrepreneurs have been relentlessly wooed by Starmer — in a so-called “smoked salmon and scrambled egg offensive” — and will have found much to reassure them in Labour’s manifesto.

But the 134-page document was a reminder that this is a plan drawn up by a centre-left party, whose instincts are to help “working people” and whose revealed preference is to squeeze the better-off when more money is required.

Included in the document are plans to raise £5.2bn from non-doms and tackling tax avoidance, £1.5bn from ending tax breaks for private schools and £565mn from closing the “carried interest” tax loophole enjoyed by private equity chiefs.

But that might not be the end of the story. Starmer might have to return to the wealthy for still more money if he wins the election, even if he insists that none of the plans in his manifesto require any other extra tax rises.

“Labour will don the mantle of wealth creation ahead of an election if they have to, but their instincts have only ever taken them in the other direction,” Jeremy Hunt, chancellor, said. He added it was “a tax trap manifesto”.

Shadow chancellor Rachel Reeves has not excluded putting up capital gains tax rates or cutting pension tax relief for higher earners, even if she says she has “no plans” to do so. Indeed she has, in the past, advocated both of those moves.

The wealthy are potentially exposed, because Starmer’s manifesto explicitly rules out increasing those taxes that account for about 75 per cent of the Treasury’s income, according to the Institute for Fiscal Studies.

Starmer said there would be “no tax rises on working people”, ruling out higher rates of income tax, national insurance and VAT, the “big three” taxes. He has also promised to cap corporation tax at the current level of 25 per cent.

The IFS has talked about a “conspiracy of silence” over the tough tax and spending decisions facing whichever party wins the next election, implying that the next chancellor could be forced to put up taxes by £20bn to avoid deep cuts to unprotected areas of public spending.

Starmer went out of his way on Thursday to reassure wealth creators that he is on their side. “Wealth creation is our number one priority,” he said at the manifesto launch in Manchester. “Growth is our core business.”

The manifesto promises business certainty — a commodity in short supply in recent years — with one major fiscal event per year and “a road map for business taxation” for the next parliament. Richard Walker, boss of the Iceland supermarket chain, was Starmer’s warm-up act.

The promised package of worker rights will be brought forward within 100 days, but with a promise that business will be fully consulted on its implementation. Starmer said Labour would be “pro-worker and pro-business”.

But he has not ruled out putting up taxes outside of the four levies identified in the manifesto, saying it would not be right for him to “write the next five years’ worth of Budgets now”. He insisted that all the policies in the manifesto were “fully costed”.

Yet the party might be forced to take further action it discovers in office that public services need additional resources or if the economic growth — on which Starmer’s plans depend — fails to materialise. Past pledges help understand its instincts when it comes to eking out additional sums.

Reeves said in 2021 that “people who get their income through wealth should have to pay more”, though she later ruled out a wealth tax. In 2018 she advocated cutting tax relief on pensions for higher earners. Neither of those ideas is currently “Labour policy” her spokesperson stressed.

Starmer, meanwhile, promised when he was standing for the Labour leadership in 2020 that he would increase income tax for the top 5 per cent of earners. That policy, like his plan to renationalise large swaths of the economy, has now been dropped — though the party still intends to bring rail services into public ownership.

Business leaders who have been reassured by Starmer and Reeves believe that the stability being promised will mark a welcome break from the recent years of turmoil under the Conservatives, albeit with a more stable period since Rishi Sunak became premier in 2022.

But they will have also noted that Starmer has displayed a ruthless tendency to say what he needs to say to get elected — in this case striking a pro-business tone — while being willing to abandon his positions when circumstances change.

Starmer explained in a Sky News interview on Wednesday that he only endorsed Jeremy Corbyn as a future prime minister in 2019 because he was “certain” that the leftwing leader was bound to lose that election.

The current Labour leader’s notably leftwing manifesto for the Labour leadership in 2020 was also swiftly abandoned once he had secured the votes of the left-leaning activists he needed to win the contest.

He argues that the Tories have “crashed the economy” in the intervening years, forcing him to change his policies, such as his previous pledge to bring water and energy companies back into public ownership, or to hit the rich with higher taxes.

Times change. But Starmer’s willingness to shape-shift in response to a changing political environment may create some doubt about his ironclad commitment to all of the 23,000 words contained in the Labour manifesto.