Big majority, big challenges… big tax rises? – our big read

Contents:

• Government tax strategy – what can we expect on 30 October?
• Labour Conference – members and unions putting Chancellor under pressure
• Tax administration – investing to close the gap
• Business looks forward to a period of calm
• Conservative Party Conference – situation vacant, would suit tax cutter
• Liberal Democrat Conference – thinktank or opposition in waiting?
• Green Party Conference – fighting to be heard in the rainbow parliament
• SNP Conference – doubts over divergence?
• Reform UK Conference – radical tax plans being rethought

Government tax strategy – what can we expect on 30 October?

There is a widespread expectation that the Chancellor will announce significant increases to taxes – particularly capital taxes – on Budget day on 30 October.

Four things set the context for the Budget: the general election campaign and the commitments (both to act and not to act) made by Labour in their manifesto, cemented by the party’s resounding victory on 4 July; the state of the public finances, condemned by new Chancellor Rachel Reeves as “unforgiveable” in a statement on 29 July; the condition of public services, described by Reeves as “broken after 14 years of underfunding” in a newspaper article on 9 September; and the broader state of the economy, which might fairly be described as patchy following a second successive month of stagnation in July. The overall picture is one of constrained public finances but with many calls on them.

Part one - what we know already

The tax changes Labour pledged at the election, and which we can expect to hear the Chancellor re-announce on 30 October, are fairly narrowly targeted:

• Abolishing non-dom tax status and replacing it with “a modern scheme for people genuinely in the country for a short period”. This is broadly what the Conservatives announced but with the addition of proposals to (a) end the use of offshore trusts to keep assets outside the scope of inheritance tax and (b) scrap the planned 50 per cent foreign income discount in the first year of the new regime
• Applying VAT and business rates to private schools
• Increasing and extending the Energy Profits Levy on oil and gas companies
• Closing the carried interest ‘loophole’    
• Increasing stamp duty on purchases of residential property by non-UK residents
• Investment to reduce the tax gap (see separate section below)

These measures would, Labour suggested in their manifesto costings, collectively raise an additional £8.6 billion a year by 2028-29.

Additionally the new government is promising a number of apparently revenue-neutral tax changes, including replacing business rates and the apprenticeship levy, as well as continuing with some measures in the previous government’s plans, including a carbon border adjustment mechanism, abolition of the separate regime for taxation of furnished holiday lets and keeping in place the lucrative freeze in the income tax personal allowance and various other thresholds until at least 2028.

More significant fiscally than all but the last of these are the things the new government has pledged not to do. These include no increases to rates of National Insurance, corporation tax, VAT or to the basic, higher or additional rates of income tax. They have also ruled out removing principal private residence relief for capital gains tax.

Labour resisted pressure during the election campaign to rule out a range of other possible tax increases. The Conservatives published a list which they described as “18 tax rises which Labour needs to come clean about”. But Labour mostly resisted any further narrowing of their options (private residence relief was an exception), sticking instead to a two part formula that emphasised, firstly, that there were “no plans” in the “fully funded, fully costed” manifesto that would require tax rises beyond those set out in the document, and secondly, that the party would not “raise taxes on working people”.

The first part of this formulation constrains them very little as Labour’s manifesto mostly restricted the party to very limited items of additional spending, funded by the limited tax increases set out above. A view that public services were underfunded under the Conservatives was set out but no plans for remedying this that would impact the Budget scorecard appeared in the manifesto. The party’s ostensible aim is to increase revenues by boosting economic growth, primarily through supply-side reforms, such as to the planning system.

The second part is more intriguing. Arguably all personal tax changes, even those targeting pensioners, affect some working people. Private equity managers work, as do most non-doms, and those paying school fees. In practice this wording appears to serve two purposes – it is shorthand for a promise not to increase taxes on work (that is income tax and employee National Insurance) and a promise not to introduce broad tax increases that affect the average person on a modest income. Pushed for a definition of ‘working people’ during a campaign interview, Keir Starmer said: “The person I have in my mind when I say working people is people who earn their living, rely on our services, and don’t really have the ability to write a cheque when they get into trouble.”

In essence this, like the first part of the formulation, constrains the new government little beyond the explicit commitment not to increase rates of income tax, NI or VAT.

Part two - what we can guess at

Additional tax increases being widely speculated about are to capital gains tax, inheritance tax and tax relief on pension contributions.

Perhaps the best-sourced story on this comes from back during the election campaign, when The Guardian highlighted a series of ‘draft documents and expert analyses’ that it said had been worked on during the campaign and circulated among senior officials and shadow ministers. One Labour memo seen by the paper estimated that increases to rates of capital gains tax could generate around £8bn for the Treasury in the long term. (While the Guardian didn’t state that the £8bn is an annual figure that would be a reasonable assumption.)

The paper seen by The Guardian also suggested that there are proposals to overhaul inheritance tax, with a possible consultation in the autumn.  Plans being considered reportedly included capping the benefit from agricultural and business relief at £500,000 for each person, rather than scrapping it. In some instances, both forms of relief could be claimed, allowing for a cap of £1m for each person in effect.  Sources said wider changes were also being considered on gifts and inheritance tax.

The paper suggested any announcements would come in an October Budget. The wording of the Guardian story suggested the documents it had seen contained options for consideration rather than representing final decisions, but nevertheless these fit with well-sourced rumours both before and since.

The best source for rumours that higher rate tax relief for pension contributions is under threat is an article which appeared in the Telegraph on 23 July. This reported that the Chancellor “is expected to consider a proposal [from Treasury officials] for a flat 30 per cent rate of pension tax relief”. The Treasury has long wanted to do this, the paper suggested, and “has a detailed plan drawn up for a raid” that has been presented to successive chancellors since 2010. Proposals on the table include flat rates of 20 per cent and 30 per cent, says the Telegraph, but, according to ‘sources’, a 30 per cent rate is thought more politically acceptable because it could be presented as a giveaway to basic rate taxpayers.

The article notes that Reeves has spoken in favour of restricting relief on pensions in the past but has since distanced herself from the proposals, insisting she has “no plans” to change the current regime.

There is other speculation around tax and pensions changes too, including around taxing pensions on death and removing the tax exemptions for the pension lump sum, however this seems less well-sourced.

Other rumours include cuts to council tax discounts, including the single-person discount, which reduces council tax bills by 25% for taxpayers who live alone, and increases to fuel duty, including an end to the temporary 5p-a-litre fuel duty cut, which was introduced in 2022 as a measure to help cut bills during the cost-of-living squeeze.

Ministers have offered few clues on what is planned, beyond hints that tax increases will indeed be forthcoming. In a speech in the Downing Street rose garden on 27 August Keir Starmer warned that the Budget would be “painful”, but he emphasised that "those with the broadest shoulders should bear the heavier burden", a strong additional hint that the tax increases to be announced next month will be targeted on those with the highest incomes or the greatest wealth. This suggests at least some of the rumours on inheritance, capital gains and pensions will be on the money.

Labour Conference – members and unions putting Chancellor under pressure

Labour members will be celebrating in Liverpool – but also taking every opportunity to put ministers under pressure to pursue progressive policies they can be proud of.

The first conference after a landslide election victory should be an opportunity to celebrate, and to some extent it surely will be, but Labour members and union affiliates gathering on the bank of the Mersey in a week’s time are already showing signs of anxiety about the direction their new government is taking and what many of them see as unnecessary self-inflicted wounds. In particular the issues of the two-child benefit limit (retained by the government, at least for now) and the pensioners’ winter fuel allowance (scrapped for all but the poorest), both of which have already been the subject of parliamentary rebellions, are causing pain among activists and parliamentarians alike.

The Trades Union Congress, which took place this week, provided a preview of what we are likely to hear in Liverpool, on the fringe if not the conference floor. TUC delegates backed a motion proposed by the Unite and RMT unions which requires the TUC to urgently agree and launch a public campaign to “strongly make the case for a more radical, progressive and credible economic strategy for national renewal”. Among other elements, the motion states that this should include:

• a wealth tax on the richest one per cent
• equalising capital gains tax in line with income tax, so that all income is taxed equally regardless of whether it comes from wealth or work
• closing inheritance tax ‘loopholes’, including allowances for agricultural and business land, and special treatment of alternative investment market shares
• applying national insurance to investment income so that all income is taxed at the same level
• closing private equity tax loopholes

In an interview with the Sunday Mirror ahead of the motion being debated, Unite General Secretary Sharon Graham said the proposed wealth tax would affect “the top 1%, broadly those people with £4 million clear and no mortgages. Anything over that they would be taxed 1% on. So if you had £6 million and no mortgage, just clear assets and money, then it would be 1% on your extra £2 million.”

Scheduled tax discussion at the Labour conference is pretty thin on the ground. It seems unlikely the Chancellor will announce new tax measures in her Monday lunchtime keynote (further detail on spending plans is more likely, though this might plausibly include more for tackling avoidance and evasion). Topics expected to be discussed on the fringe include oil and gas taxation at an event organised by an environmentalist party group; VAT for international visitors at an event sponsored by the Association of International Retail; tackling economic crime at a number of events; and tax generally at an event titled ‘How Will Labour Pay for Public Services?’, sponsored by the CAGE Research Centre.

Left-of-centre think tanks can also be relied upon to make the case for progressive tax reforms. In the run up to the conference the Fabian Society thinktank has published a report advocating a flat rate of pension tax relief of 25-30%, levying inheritance tax on pensions, reducing the maximum tax-free pension lump sum, levying National Insurance on employer pension contributions and employee NI on private pension income.

Some of these increases also get the backing of the Resolution Foundation, which thinks that, despite the constraints on the government, “there is still scope to raise substantial revenue – of over £20 billion if needed – with a focus on Inheritance Tax, Capital Gains Tax and pension contribution tax reliefs.” This includes a proposal that marginal CGT rates for shares be aligned with dividend tax rates, and that property capital gains should be taxed like wages, but with inflation-indexing. Within IHT, as well as bringing pension pots within scope, they suggest business and agricultural reliefs should be ended and the residence nil-rate band scrapped, while lower IHT bands should be added.

Torsten Bell, who was director of the Resolution Foundation until three months ago, is of course now a Labour MP, joined on the green benches by Miatta Fahnbulleh, the former chief executive of the New Economics Foundation.

The Institute for Fiscal Studies disagrees with the Fabians about moving to a flat rate of pension tax relief, saying it would be “damaging, complex and inequitable”. But the IFS agree with the Fabians on reducing the amount that pensioners can withdraw from their pension pots tax-free and that pension pots should be subject to inheritance tax.

Meanwhile, under the heading, “How to raise taxes”, the latest edition of the New Statesman urges the Chancellor to “act boldly” on tax, raising capital gains tax and laying the groundwork for substantial reforms of council tax and business rates.

Most of the large new intake of Labour MPs have held their nerve so far in the face of the flak they have faced from constituents over the winter fuel allowance vote, in particular. But there is a widespread and fervent hope that the Budget – and perhaps even the conference – will see the party move back onto the front foot with popular retail policies funded by tax increases for the rich, big business and other unsympathetic targets.

Tax administration – investing to close the gap

While the focus of party members and the media is mostly on tax rates and levels, tax professionals will also be interested in Labour’s plans for tax administration, compliance and the policy-making process.

The most detail here came in a 15 page paper published in April: ‘Labour’s Plan to close the Tax Gap’. The party described the UK tax gap – the gap between the tax HMRC believe is due and tax actually paid – as remaining “stubbornly high”. They pointed to comments by the head of the National Audit Office, in an interview with the Financial Times in January, that there is £6 billion annually that could be recovered through a concerted effort on tax compliance.

Under Labour’s ‘invest-to-save’ plan, up to £555 million of additional funding will go to HMRC each year to boost tax income by:

• Bolstering the number of compliance officers working out of the tax office by up to 5,000 to increase the number of investigations, tackle fraud and ensure tax owed is collected.
• Investing in digitisation of HMRC to improve compliance rates and customer services, and free up resources to focus on more complex cases.
• Working with businesses, the tax profession and digital service providers to bring a new focus to HMRC’s modernisation, including greater use of AI – learning from industry and best practice overseas to make sure its scope is ambitious, whilst having new, achievable timescales for delivery.

Where would Labour’s compliance focus be? The party says they would focus additional resource on segments with the greatest complexity and return (mentioning larger businesses in particular). “Among other groups including smaller businesses, upstream compliance activity is a better use of resources to improve compliance yields”, they suggest.

Alongside resourcing, the party says there are additional legislative and regulatory changes that could help to tackle tax non-compliance. Measures they would consider (they describe them as “options”) include taking forward the outcome of the review on regulating the tax advice market and requiring a wider range of tax schemes to be reported to HMRC, under the disclosure of tax avoidance schemes (DOTAS) rules.

While customer service is not the central focus of Labour’s paper the party does acknowledge the importance of effective customer service in increasing tax compliance. The paper states that Labour would “seek to improve the core customer service offer.” However the party has not so far been explicit about how this would be done and in particular whether any of the promised additional funding would go into customer service personnel.

There is no suggestion Labour will drop or take a substantially different approach to Making Tax Digital. As noted above, digitisation is key to Labour’s plans and it is possible that some extra money may be provided to speed its progress. The party’s spokespeople have in the past been critical of delays in the programme. There are some early signs that the new administration is keen to work closely with the tax profession to make the initiative a success.

The government have affirmed their plans to hold just one major fiscal event per year – an autumn Budget, as called for by CIOT, the Institute for Fiscal Studies and the Institute for Government in our 2017 Better Budgets paper (and as committed to at the time by then chancellor, Philip Hammond, though adherence to this commitment has been at best patchy in the years since, despite initial good intentions). This is part of the government’s strategy for strengthening the fiscal and spending frameworks, which also includes spending reviews every two years and legislation to require that fiscally significant announcements are always subject to an independent assessment by the Office of Budget Responsibility.

Business looks forward to a period of calm

Businesses have reacted positively to Labour promises of a more stable and predictable corporate tax system, but some are concerned at what they see as the UK’s loss of international competitiveness.

Business groups have been broadly supportive of the government’s plans for a business tax roadmap, which we are told will be outlined in the Budget and finalised, with wider stakeholder input, in the months following. The CBI’s Head of Tax Policy, Alice Jeffries, told a CIOT-IFS debate in July that the first big call from businesses on tax policy is to minimise changes to the tax system, allowing current rates and reliefs to bed in. She suggested that such changes as were to be made should focus on better aligning the tax system to achieve the government’s main aims. From this perspective, she identified three strategic areas where policy change is needed: net zero, business support for local communities, and labour market activation.

The new government has committed not to increase the corporation tax rate above its current 25 per cent level. Might it go lower? The manifesto contains a promise to “act if tax changes in other countries pose a risk to UK competitiveness”. But it is almost inconceivable that such a change would be made at this point in the new government’s term.

Labour has also committed to keep permanent full expensing, another move widely welcomed by business groups. However Dominic Mathon, Head of Tax and Treasury at RELX and a member of the 100 Group Tax Committee, said at a recent CIOT-IFS debate that heads of tax at large businesses were “mystified” by the focus on full expensing as it is “of very little value to us”. If there were a trade off they would rather scrap full expensing and have “a little bit of movement on the corporate tax rate”. At the same event Helen Miller of the IFS suggested full expensing might usefully be extended to additional assets beyond plant and machinery. This is a more realistic possibility.

Labour’s manifesto also said the party would look to provide firms with greater clarity on what qualifies for allowances to improve investment decisions. We may hear more on this – or see a consultation – at the Budget. Reform of the Apprenticeship Levy into a more flexible Growth and Skills Levy has already been announced and is part of a Skills England Bill.

Reform of business rates is less far advanced but it may be that we get a consultation this autumn. The CBI got in ahead of this with a report this week suggesting moving rates multipliers from an all or nothing “slab” system to a banded “slice” one, removing cliff edges and barriers to expansion.

A number of business sectors will be bracing themselves for what is in store for them. Tax increases for private schools, the oil and gas sector and private equity have been well signposted. In respect of the latter we should hear the outcome of the call for evidence on the tax treatment of carried interest. In an interview during the election campaign Rachel Reeves signalled that Labour would continue the favourable tax treatment of private equity executives in situations where fund managers put their own capital at risk. 

Labour will continue the UK’s support of the OECD-led two pillar Inclusive Framework. Indeed there will probably be even more appetite in the new government for international co-operation on tax matters than there was among their predecessors. However there is no sign so far of any change in the UK’s opposition to the United Nations’ bid to take a greater role in tax co-operation.

Conservative Party Conference – situation vacant, would suit tax cutter

Tax is a key issue for Conservative leadership contenders, but more in terms of passionate opposition to Labour’s plans than because it offers any significant dividing lines between them.

Halfway through a four month leadership contest what can we say about Conservative tax policy?

At the election the party had a strong retail offer on tax – though some questioned whether the big cuts in welfare benefits and the tax gap promised to fund it would actually have materialised.

The big tax cuts in the Conservative manifesto were a further 2% off employee National Insurance (NI), cutting it to 6%, abolition of class 4 (self-employed) NI and a higher income tax personal allowance for pensioners. The party also promised to move to a combined household income threshold of £120,000 for the child benefit charge, abolish stamp duty land tax (SDLT) for first time-buyers on properties worth up to £425,000 and introduce a two-year exemption for capital gains on sales of residential properties by landlords to their tenants.

Additionally the Conservatives committed, like Labour, that they would not increase rates of income tax, VAT or corporation tax, but went further in ruling out increases to capital gains tax, employers’ NI and tax on pension contributions. They also promised to retain a list of personal and business reliefs including Agricultural Property Relief and Business Relief. In essence a Conservative government, should one have been re-elected, would have had very little flexibility to increase taxes without breaking its manifesto promises.

The status of all this election policy is currently unclear as we wait for the vacant post at the top of the party to be filled. The leadership contenders have uniformly taken low tax stances, though with slightly different emphases.

Of the two favourites Kemi Badenoch has emphasised her opposition to the extension of the windfall tax on oil and gas businesses. Robert Jenrick, meanwhile, has talked about how he “would like to see the income tax thresholds rising again with inflation because that is dragging far too many people into high tax rates”.

Among the two outsiders, Tom Tugendhat has advocated for lower capital gains tax and cutting fuel duty. James Cleverly, while criticising Labour’s tax policies and calling for tax cuts, has not made particular proposals.

The four contenders will each get a platform at the conference to set out their plans, and with tax cuts a popular theme among party members we are likely to hear more from them on this. In this environment it would be odd for shadow chancellor Jeremy Hunt to announce any new policy in his conference speech (assuming he even gets one) but we will no doubt hear a robust attack on Labour’s plans both announced and rumoured as well as a passionate defence of the party’s economic record. With the leadership result set to be announced a few days after the Budget it will fall to Hunt and, in the chamber, Rishi Sunak to provide the immediate Conservative response to the Chancellor’s statement. We can be confident that, whoever wins, the party will for the time being define itself against Labour’s proposed rises, loudly condemning VAT on school fees and any increases to capital gains or inheritance taxes in particular.

Liberal Democrat Conference – thinktank or opposition in waiting?

With 72 MPs the Liberal Democrats are the largest third force in Parliament for a century. But faced with a Labour government with a stonking majority what is the party’s strategy for the Parliament ahead?

The Lib Dems fought the election on a fiscal plan to bring in nearly £27 billion extra in tax revenue by the final year of the Parliament, from measures including a crackdown on tax avoidance and evasion, reforms to capital gains tax and raising more from large businesses in a number of sectors, particularly banking.

There is a history of Labour governments adopting Lib Dem policies after past elections, for example Gordon Brown’s decision to increase national insurance by 1p (although the Lib Dems had favoured income tax) to increase spending on health services after the 2001 election. Is there anything in the Lib Dem manifesto from this year that Rachel Reeves might pull out of her red box?

The most likely is reforms to capital gains tax. The Lib Dem plans at the election involved raising rates to roughly align them with those for income tax, while bringing in compensatory measures such as a new “inflation allowance”, a higher tax-free allowance and a targeted relief for small business. The party estimated the changes would bring in a little over £5 billion, though it is unclear whether this made any allowance for behavioural effects. It would not be a surprise if something very similar to this was announced by Reeves on 30 October.

Among the other measures put forward by the Lib Dems in July was restoring Bank Surcharge and Bank Levy revenues to 2016 levels in real terms. Party leader Ed Davey encouraged Keir Starmer to do this at Prime Minister’s questions this week. Starmer said he would have to wait for the Budget. Ahead of the election Reeves and Starmer attempted to reassure banks that Labour had no plans to tax them harder. However they did not rule out increases and the FT reported this week that “Officials close to the Treasury’s Budget preparations say higher bank taxes are one of a full range of options on the table”.

Labour may also be tempted by the Lib Dem proposal to raise the Digital Services Tax on tech giants, though they will be wary of antagonising the United States. The Lib Dem plan for a 4% tax on share buybacks took flak during the election campaign but it’s not impossible a Labour government could consider adopting it at a lower rate. An additional sewage tax on water company profits and an extra levy on tobacco company profits are two other Lib Dem measures that may tempt Labour. The new government are already in the same camp as the Lib Dems on increasing the Energy Profits Levy and introducing a gambling industry levy. Given the strong focus on public health it is also easy to imagine Labour picking up Lib Dem plans to extend the soft drinks levy and scrap VAT on children’s toothbrushes and toothpaste.

Lib Dems, like Labour, want to replace business rates, but the party has gone further with its planning, setting out plans for a revenue neutral switch to a ‘Commercial Landowner Levy’, essentially a land value tax limited to non-residential land and property. Again it would not be a surprise if this was where Labour were to end up.

Finally, the Lib Dems, like the Greens (see below) are strong on environmental taxation. While it’s hard to see Labour picking up the Greens’ plan for a huge carbon tax any time soon, Lib Dem proposals for taxing frequent flyers and private jets more, more generous tax relief for home insulation and cutting VAT on public charging of electric vehicles could be under consideration.

So, beyond being an unthanked thinktank for Labour, where do the Lib Dems go from here? On tax policy there is unusually little on the agenda for Brighton so existing policies can be assumed to remain in place. Lib Dems are likely to be supportive of most anticipated Labour tax rises, though the party opposes VAT on school fees on the grounds that education should be exempt. When money becomes available the Lib Dems are likely to return to their calls for the income tax personal allowance to be increased – a coalition government achievement the party feel they don’t get enough credit for.

More generally the conference will be notable for not just gleeful celebrations but much discussion, on and off the conference floor, about party strategy. There is no chance of unanimity of course, but the likeliest outcome is that the party will coalesce around a similar agenda to the 1997-2005 parliaments, when it was last this strong – focusing on the Conservatives electorally, promoting individual MPs as local champions, but offering themselves to Labour and other centre-left voters as the effective opposition, not shrill but persuading ministers to move with persuasive arguments and highly visible campaigns.

Green Party Conference – fighting to be heard in the rainbow parliament

A buoyant Green Party is pinning its hopes on syphoning off disaffected Labour voters with promises of soaking the rich with higher taxes.

The combined Labour and Conservative vote share at the general election was just 57 per cent, the lowest since the 1918 general election. Leaving aside Northern Ireland parties seven parties won four or more seats in the Commons, with the SNP winning nine, Reform UK five, Plaid Cymru and the Green Party each getting four. Additionally, since then, five MPs elected as independents have joined together to form an Independent Alliance group in Parliament.

The result of this is that there are now more political voices with professional staff and a platform, fighting to be heard.

At their conference in Manchester last weekend the Greens emphasised tax increases and redistribution over even their traditional climate change focus, positioning themselves as a progressive alternative to Labour, unabashedly arguing for big tax hikes on the wealthy and higher earners. In a message ahead of the conference, party co-leader Carla Denyer MP said: “The Budget at the end of October will set the course for the rest of this parliament. Green MPs do not accept the need for public spending cuts.”

Proposals the Green Party MPs are pressing Rachel Reeves for in her October budget include a wealth tax, aligning capital gains tax with income tax rates, aligning tax rates on investment income with National Insurance rates on employment income, removing the Upper Earnings Limit on National Insurance, unspecified reforms to inheritance tax, higher windfall tax and fuel duty. These broadly reflect the platform the party put forward at the general election, which also included a carbon tax on all fossil fuel imports and domestic extraction which they said could raise an additional £80bn annually by the end of the Parliament. While the carbon tax was de-emphasised at the conference it is not believed to have been dropped by the party.

At the conference the Greens voted to oppose the introduction of Freeports and Special Economic Zones across the UK. Co-leader Adrian Ramsay said: “There is no place for Freeports or Special Economic Zones in the United Kingdom. Their introduction will only serve to displace economic activity from elsewhere whilst reducing tax revenue that is so desperately needed for our broken public services.”

The party also voted to press the new government for much closer relations with the European Union, arguing to rejoin the Customs Union “to begin to overcome the obstacles that small businesses have faced in trading with our closest partners since Brexit”. 

SNP Conference – doubts over divergence?

The Scottish National Party (SNP) kicked off the 2024 party conference season, with party delegates gathering in Edinburgh at the end of August.

Tax policy found its way onto the conference agenda in the form of a motion proposed by the SNP Trade Union Group (SNPTUG). It called on the Scottish Government to make “effective use” of existing devolved tax powers to increase taxes on the wealthiest Scots.

While SNPTUG secretary Simon Barrow said it was a “myth” that the wealthy would migrate in response to further tax increases, Scottish Ministers have warned that tax divergence must be kept “under review” in a sign that the (relatively) new leadership team of John Swinney and Kate Forbes are conscious of the limits of tax devolution.

Speaking at a fringe event hosted by the Child Poverty Action Group, Forbes, the Deputy First Minister, warned wealthy Scots could leave the country if taxes increased further, telling attended: “you just can’t get away from the reality, it’s very easy to move”.

Following the resignation in April of Humza Yousaf as First Minister, and the subsequent appointment of John Swinney as his successor, the SNP’s leadership has appeared ready to temper its approach to income tax increases. That may partly be explained by the SNP’s recent decline in electoral fortunes that culminated in the party posting its worst UK General Election result since 2005. As Swinney is reported to have told a closed-doors session of SNP conference, the party will need to regain the support of the middle-class voters its income tax policy has targeted if it is to retain its status as the party of government after the next Scottish Parliament elections in 2026.

Reform UK Conference – radical tax plans being rethought

Four million people voted Reform UK in July. Can the party build on this?

In their manifesto at July’s election, Reform UK proposed raising the inheritance tax threshold to £2 million, reducing corporation tax to 15%, lifting the income tax personal allowance to £20,000 and the higher rate threshold to £70,000. The party also said it would abolish Business Rates for high street-based SMEs, offsetting this with an Online Delivery Tax. This was in addition to introducing a higher rate of National Insurance for foreign workers, abolishing IR35 rules and promising “major simplification” of the tax system.

In sum these added up to a spectacular £90 billion of tax cuts. Eye catching, but analysts such as the IFS questioned whether they were actually deliverable.

In an interview earlier this month the new chairman of Reform UK, businessman Zia Yusuf, indicated that the party’s election platform, billed as a ‘contract with the people’, was being ditched with the party working on a revised set of policies. Speaking to The Independent, Yusuf said that over the “coming years” the party “will be putting the policy meat on the bone” as well as expanding on how policies would be phased in “so that we can demonstrate that we can be trusted to be great stewards and guardians of the British economy”. He insisted though, that the party’s policies would remain focused on slashing immigration and cutting taxes.

Reform’s autumn conference takes place at the NEC in Birmingham on 20-21 September. But some have questioned whether it is even a political party at all. At the moment Reform is a limited company with Nigel Farage as the major shareholder. The chairman told The Independent that “democratisation of the party” is a priority including the drawing up of a party constitution and a mechanism for party members to throw out their leader if things go badly.

One question for Reform is whether the election of five MPs will boost the party’s profile or challenge their ‘insurgent’ approach by co-opting them into the establishment, keeping them occupied in low profile parliamentary debates. Similarly a toning down of the party’s radical tax agenda (described as ‘Liz Truss on steroids’) to a programme that is more achievable and within the ‘Overton window’ might cost the party some of its supporters even as it gains it a hearing elsewhere.