Aljazeera.net correspondents
LondonThe British, along with the country’s financial and business markets, are awaiting the new budget that Prime Minister Keir Starmer will announce next October. This is the first budget of the Labor Party government and will define the features of this government’s economic policy. Starmer sparked a lot of controversy and concern among the British public when he announced in a speech addressed to the British people that the upcoming budget will include many difficult decisions.
Keir Starmer’s speech after assuming power differs from the speech he gave during the election campaign, especially in the economic aspect. During that period, Starmer promised not to raise taxes and to increase public spending to improve health and education services, as well as increase support provided to poor families. However, after coming to power, Starmer is promoting various tax increases, as well as an austerity policy approach, and removing some types of support provided to the elderly, including support for heating and petrol bills, as well as studying the withdrawal of the free transport card for retirees.
Keir Starmer justified his government’s austerity approach by what he called the “utter chaos” left behind by the Conservatives, who – according to him – put the British economy in a difficult situation that will take years to resolve, pointing to the existence of a gap in the state budget worth 22 billion pounds sterling.
While some accuse Keir Starmer of making false promises during his election campaign, others say that fixing the country’s economic situation requires a lot of sacrifices, amid expectations that Starmer will target the country’s wealthy class by raising taxes imposed on them and will not approach taxes related to the middle class.
Betrayal of taxpayers
John O’Connell, CEO of the Taxpayers’ Alliance, criticised Keir Starmer’s comments about the tough economic decisions he will make in the coming weeks, saying they would “disappoint British taxpayers who were expecting new policies to ease their tax burdens, not the other way around”.
The British economic expert told Al Jazeera Net, “There is a sense of betrayal among the British, especially those who voted for the Labour Party, because what Keir Starmer’s government is doing does not help citizens improve their financial situation, but on the contrary, it increases the consolidation of the high tax policy that Britain has been adopting for more than 70 years.”
Regarding the justifications presented by the Prime Minister that the British economy needs radical reforms, John O’Connell confirmed, “The Prime Minister constantly talks about reforming the foundations of the economy, but he does nothing towards real reform, but he presents the same economic prescriptions that caused the collapse of the British economy over the past decades.”
The British economist believes that the solution lies in the exact opposite of what Keir Starmer is proposing, “If his government is serious and truly committed to creating wealth, it must avoid increasing taxes, because previous experiences have shown that this policy crushes the economy, weakens the wheel of production, and causes the flight of capital and investments.”
Eye on the rich
Stephanie Churchill, director of tax and economic consultancy Churchill Tax, sees Labour’s policy from a different perspective than John O’Connell, describing the measures expected to be taken as reducing “tax injustice”.
The tax expert revealed some measures during her interview with Al Jazeera Net, including “removing the concept of tax residency. This reform will end the use of offshore funds to keep assets outside the scope of tax, as well as removing tax exemptions that were used by apartment owners who rent their homes for a short period, with a focus on people who own a number of properties and rent them for short periods to avoid paying taxes. A 20% value-added tax will also be imposed on private schools in the country.”
“Tax changes are inevitable, because of the amount of revenue the government needs to raise, so potential targets for these changes include the capital gains tax, which could see an increase, as well as the inheritance tax,” Stephanie said.
The economist warned that increasing the tax on capital gains would be a difficult decision, “because it is primarily directed at the wealthy, or at least those who can afford to own financial assets, but at the same time, it is a tax that taxpayers can easily avoid legally simply by not selling those assets. So, increasing the rate could lead to a decrease in tax revenues because the wealthy may be reluctant to sell their financial assets to avoid paying more taxes.”
Stephanie called on Starmer’s government to be careful in taking any decision, “because any sudden and radical decision could lead to a shock in the financial and business markets and could send a negative message to investors and businessmen.”
