Rachel Reeves proposes new tax hours before saying: ‘Now is the wrong time to raise taxes'

Rachel Reeves proposed a new tax on buy-to-let and investment money, but later went on to say: ‘Now is the wrong time to raise taxes’ – Christopher Furlong/Getty Images

Rachel Reeves has suggested new taxes on buy-to-let properties and investment earnings, despite claiming: “Now is the wrong time to raise taxes.”

The shadow chancellor criticised Boris Johnson on Thursday for presiding over a “triple whammy” of tax rises, including an increase in National Insurance contributions, a freeze to income tax thresholds and higher council tax.

In a speech in Bury – where she was introduced by Christian Wakeford, who defected to Labour this week – Ms Reeves highlighted the increased pressure on families as energy prices increase and Britain heads for a cost of living crisis.

“People rightly expect leadership from government, but instead they are being left to shoulder the burden alone, with the added insult of the triple whammy of a freeze on the income tax threshold, rising council tax and a hike in National Insurance contributions,” she said.

“Now is the wrong time to raise taxes on ordinary working people.”

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Rachel Reeves was introduced by Christian Wakeford, who defected to Labour from the Conservatives this week – Christopher Furlong/Getty Images

Ms Reeves said Labour would cut VAT on energy bills and expand the Warm Homes Discount, which the party estimates would shave £200 off the typical bill.

But in an interview on Thursday morning, Ms Reeves said Labour would keep the NHS and social care dividend that the Government will pay for by increasing National Insurance.

To pay for the levy, she said the party would increase taxes on buy-to-let properties and those who earn money from investment – potentially hitting elderly voters who have put their savings into property or the stock market.

“We've said that it's not right that the only people who are being asked to contribute to the health and social care levy are those people who go out and work every day and the people who employ them,” Ms Reeves told BBC Radio 4’s Today programme.

“If you get your income from stocks and shares and dividends or a portfolio of buy-to-let properties, then you pay no additional tax whatsoever in this health and social care levy,” she said.

Although buy-to-let landlords are most likely to be professional workers, 12 per cent of buy-to-let landlords are blue collar workers, while seven per cent are retired, according to research by the London School of Economics.

Young couples make up 35 per cent of buy-to-let landlords in the UK.

Those who earn money from investments, including a property portfolio, do not pay National Insurance Contributions on their profits but are already liable for other taxes, such as capital gains tax.

Labour says the planned National Insurance increase, of 1.25 per cent on the contributions of both employees and their firms, disproportionately hurts working families.

Sir Keir Starmer, the Labour leader, has previously argued that the National Insurance rise leaves “a private landlord renting out multiple properties not paying a penny more in tax, and their hard-working tenants to pick up the burden”.

Labour would instead fund the levy “by taxing the incomes of landlords, and those who buy and sell large quantities of financial assets, stocks and shares”, he said.

But at the time the rise was announced, Treasury sources argued that raising the required £12 billion for the national health and social care levy could only be achieved by increasing either NICs or income tax.

Challenged on whether Labour’s alternative plans would raise the £12 billion required, Ms Reeves said: “Well, there's lots of papers out there from different organisations that show you could do exactly that.

“We will set out our plans ahead of a general election, but it's not right just to ask those people who go out to work for a living to pay higher taxes, especially at a time when the prices of everything are going up.”

On Thursday, a leading think tank said Rishi Sunak should solve the cost of living crisis by giving all households who pay a basic rate of tax a one-off cheque for £300.

Rather than constructing a complex support package for families struggling with the rising cost of energy bills and other goods, the Social Market Foundation said the Chancellor should “just write millions of cheques”.

A Treasury source said no final decisions had been taken, but suggested the scheme was unlikely to happen because no mechanism exists for direct grants.

In her speech on Thursday, the shadow chancellor also laid out Labour’s plan for economic recovery after Covid.

She said it was based on a “five-point plan” which included boosting British businesses, improving training and skills, supporting entrepreneurs, designing a new industrial strategy and investing in new technology.

Also on Thursday, Sir Tony Blair – the former prime minister and Labour leader – accused Boris Johnson of failing to provide any new ideas to meet the challenges of modern politics.

Sir Tony Blair made a speech on the future of Britain on Thursday – Owen Billcliffe/Institute of Global Health Innovation

“There is a gaping hole in the governing of Britain where new ideas should be,” he said in an online address.

“We are living through three revolutionary changes simultaneously and are ill-prepared for any of them. Each of them would require major changes to the way we work as a nation.

“All of them together pose a challenge which is unprecedented in recent history.”