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Labour Unveils £5bn Plan to Combat Tax Avoidance and Bolster Public Services

April 9, 2024

Rachel Reeves is weighing up plans to offer income tax or national insurance cuts in Labour’s general election manifesto to show that the party is on the side of “opportunity and aspiration”.

Labour’s Rachel Reeves has unveiled plans for a £5bn crackdown on tax avoiders to address a gap in the party’s spending proposals following the Tories’ adoption of Labour policies to finance tax cuts by scrapping the non-dom regime.

Reeves emphasized Labour’s commitment to tackling tax fraud and non-compliance, warning households and businesses of tough measures to combat tax avoidance. The £5bn raised from this initiative will be directed towards funding free school breakfast clubs and additional NHS appointments.

Speaking ahead of a visit to a Manchester hospital with shadow health secretary Wes Streeting, Reeves criticized Jeremy Hunt for impeding HMRC’s tax collection efforts through budget cuts that reduce the number of compliance officers and tax investigators.

Labour’s plan aims to reduce the “tax gap” – the disparity between owed and collected taxes – to previous levels after it surged by over £5bn in the past year.

Reeves outlined measures to generate £2.6bn over the next parliament by addressing loopholes in the government’s plan to abolish non-dom tax exemptions. These measures include banning the use of family trusts to evade inheritance tax and scrapping the 50% discount in the first year of new rules.

Labour’s spending plans faced scrutiny when the Tories incorporated two key revenue-raising Labour policies – abolishing non-dom tax exemptions and extending a windfall tax on oil and gas companies – to fund a national insurance cut at the budget.

Reeves reiterated Labour’s commitment to fully costed and funded manifesto pledges, ensuring no exceptions. She emphasized that revenue generated from targeting tax dodgers would support vital sectors like healthcare and education.

Labour attributed the widening tax gap to HMRC’s under-resourcing, resulting in inadequate revenue collection and compliance management.

Reeves cited examples from countries like the US, Australia, and Canada, where tougher measures against tax dodgers led to significant increases in tax receipts.

The initiative follows calls from prominent figures like TUC general secretary Paul Nowak and businessman Julian Richer for stronger government action against wealthy tax evaders.