Labour were right to break their promise on taxes – we should all be paying more

... and the Conservatives are the last people who can complain, writes John Rentoul

We knew their promises were undeliverable. Everybody said so. Paul Johnson of the Institute for Fiscal Studies talked himself hoarse during the election campaign saying that both parties were engaged in a “conspiracy of silence” about the sustainability of the public finances.

As he heads off, after a decade at the IFS, to be provost of The Queen’s College, Oxford, with the thanks of a grateful nation echoing in his ears, we can observe that he understated the case. It was not actually “silence” of which the parties were guilty: their crime was that of making audible promises that they could not keep.

Keir Starmer and Rachel Reeves promised no tax rises on working people, and sometimes said that no additional tax rises were needed to fund the plans in their manifesto. Within days of the election, the new prime minister and chancellor announced that they were going to have to break those promises – although they didn’t quite put it like that – because the books were in a worse state than they had expected.

This was despite Reeves having explicitly said during the election that this device of claiming surprise at the real state of the finances was something that she would not do. “We’ve got the OBR now,” she told the Financial Times on 18 June. The independent Office for Budget Responsibility sets out the public finances in an impartial way so that the government cannot hide the bad news. “We know things are in a pretty bad state,” she said. “You don’t need to win an election to find that out.”

But we knew that she would put taxes up anyway. Just after the election was called in May, Ipsos asked voters how likely it was that either party would “increase taxes that you personally pay” if they won: 56 per cent thought it likely that Labour would; 52 per cent thought it likely that the Conservatives would.

You could say, then, that the voters were complicit in this not-so-silent conspiracy. They didn’t believe Labour’s promises but they voted Labour anyway because it was time for change and they didn’t think Labour could be worse than what they had.

It may be reasonable to complain now that Starmer and Reeves were not being straight with people. In fact, I would go further and say that it is essential that we point out that they are breaking their promises. But, but, but…

It is worth asking if the voters bear some responsibility for a country in which politicians feel they cannot get elected if they say they are going to raise taxes, at a time when that is the only sensible and responsible thing to do. Voters want top-quality public services, complain loudly when they don’t get them, but punish any politician who points out that they have to be paid for.

So, while it is important to hold politicians to account for saying one thing before the election and then doing another, we ought also to say that taxes should go up – because the alternative is that public services sink too far below what is acceptable in a civilised nation.

It is a good thing that taxes will rise and that “working people” will have to pay them, because there is nobody else. As Reeves has painfully discovered, when the Treasury puts proposed higher taxes on the globally mobile super-rich through its model, they tend to leave the country, cutting revenue rather than raising it.

However, the one group of people who have no right to accuse Labour of breaking its promises is the Conservative Party, which cut tax in March as a trap for Labour, and whose election tax and spending promises were just as dishonest.

Jeremy Hunt’s unfunded cut in national insurance was wrong and irresponsible, but the symbolism of a tax cut is so strong that Labour had to go along with it – even though both parties, and most voters, knew that it would not only have to be reversed after the election, but that further drastic action would have to be taken to stabilise the public finances.

Any Tory attacking the government for putting up taxes ought to be forced to focus on the substance of the issue. What spending would they cut instead? If the Tories had won the election, they would have been in the same position as Reeves is now. They, too, would have agreed to the public sector pay settlements, because they would have had to. Otherwise it would be impossible to recruit and retain doctors, nurses, teachers, police and the armed forces.

What spending would they have cut? What tax rises would they have imposed? They didn’t tell us in the election campaign, probably because they don’t know. I don’t think Reeves knew for sure what taxes she would put up, although she was canny enough not to rule out a rise in employers’ national insurance contributions.

All the voters had to go on was a vibe. They knew that Labour was more likely to lean in favour of public spending and the Tories to lean against it. That Ipsos survey at the beginning of the election campaign found that, although most voters thought both parties would raise taxes, 59 per cent thought Labour was “likely” to “increase spending on public services”, whereas only 32 per cent thought that of the Tories.

That is what people knew they were voting for: higher taxes and better public services under Labour, or higher taxes (possibly not quite as high) and worse public services under the Tories. They chose the Labour option, and when you strip away all the noise around the Budget, that is what they got.