Keir Starmer duped his way to power. What principles can Labour show?

Reports conjure up images of stressed-out staffers punching away at calculators in increasing desperation as the numbers keep refusing to add up.

Even the flagship plan to generate millions from closing tax loopholes used by non-doms – not just scribbled on the back of a napkin, but trumpeted in the Labour Party manifesto – seems to be falling apart, with concerns that it might end up increasing the black hole in the UK’s finances rather than helping to plug it.

Time is running out, as proposals need to be presented to the Office for Budget Responsibility in advance of the big day. One problem for Keir Starmer’s government is that plans reflecting what remains of “Labour values” might achieve worthwhile aims, but fail to achieve the Government’s stated primary aim of increasing revenue and cutting expenditure, or even manage the opposite.

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A policy may be redistributive, it may help to make the UK a fairer place – at least on paper – but the Budget is a numbers game, and Labour have vowed to adhere to their two “non-negotiable” fiscal rules: 1) The current budget must move into balance, so that day-to-day costs are met by revenues, and 2) Debt must be falling as a percentage of GDP by the fifth year of the forecast.

They insist they will not be changing the rules, but there is speculation that they might tinker with the definition of “debt” in order to permit additional borrowing in the tens of millions. Sneaky.

Even if this happens, there will be tough calls to make on the few forms of taxation they haven’t already promised not to increase.

One of these is capital gains tax, which some would like to see raised to the same levels as income tax on the principled basis that people who work for a living should not face higher taxes than those who invest. Doing so would make the UK a European outlier and is therefore highly unlikely to happen, but Reeves is reportedly considering a significant hike to the tax payable on the sale of second homes.

Labour Chancellor Rachel Reeves seems more concerned with finances than principles (Image: PA) This was set at 28% for higher-rate taxpayers until last spring, when Jeremy Hunt cut it to 24% in a bid to encourage landlords and owners of second homes to sell up, and help make more property available to first-time buyers.

Reeves is now considering putting it back up, potentially to 33% or even as high as 39%. It’s hard to predict what the consequences of this would be in the short and longer term – there’s barely been time to assess what impact Hunt’s move had.

If the tax deters landlords from selling (because they wish to avoid paying more tax when they do), then no additional revenue will be generated in the short term.

If it is scheduled to come into effect in the spring, it might prompt a rush of early-year sales, high in volume but at the lower level of taxation. After that it could be a disincentive to further buy-to-let investment while giving current owners an incentive to hold on to their properties in the hope the rate is slashed again. The Telegraph newspaper, unsurprisingly, sees such proposals as part of the Government’s “war on property investors”, against which it has begun a campaign.

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At first glance it appears the paper has the interests of both landlords and their tenants at heart (“Why landlords face wipeout under Labour – and it’s terrible news for renters”).

But on closer inspection it wants a delay to the introduction of the new Renters’ Rights Bill that will halt “no-fault” evictions in England (following an example set in Scotland).

When Labour announced their hugely contentious decision to restrict Winter Fuel Payments to pensioners on benefits, the rationale given was that it would save £1.3 billion-£1.6bn per year. Little consideration seemed to have been given to the fact that hundreds of thousands are entitled to benefits but do not claim them, with the DWP’s own figures suggesting £2.1bn of pension credit and £1.3bn of housing benefit went unclaimed by pensioners in the year ending 2022.

A surge in benefit applications might well be seen as a good thing in the eyes of many Labour supporters, but the Government can’t agree that this would be a desirable outcome without calling into question its competence at calculations.

Discouraging investment in second homes – displacing such investment to other sectors, while increasing the supply of properties available to owner-occupiers or housing associations – could be seen as a worthwhile political aim in itself.

But if Reeves is narrowly focused on the bottom line, the broader consequences (positive or negative) of any policy risk being overlooked.

Will she be able to defend her Budget decisions as fair and principled, logical and rational, or just shrug and tell us that every decision is regrettable but essential?

What principles do she and Starmer dare to endorse, now they’ve duped their way into power?