Labour grasps the nettle. And injures itself.

So, the latest Colmar Brunton poll has Labour down to its lowest level of support (in that poll) for 15 years. This nadir was apparently reached on the back of the initial reports of its capital gains tax policy, but before the details were formally released.

As much as I’d like to revel in Labour’s misfortune, I think that the details of Labour’s policy will prove more popular than the concept, so I doubt that they’ll be facing an electoral meltdown on the scale that the poll would suggest.

It’s somewhat unusual for the details of a policy to be more popular than the concept – it’s more generally the other way around. What’s unfortunate, however, is that in terms of the quality of the policy, it is the other way around. A capital gains tax (CGT) is, in principle, a good idea. Activities that attract tax are effectively suppressed relative to other activities, which means that giving different tax treatment to different forms of income has the effect of discouraging the more highly taxed activity. Encouraging speculation versus other types of productive activity isn’t desirable, and so rationalising that situation makes sense.

But, in a nation of property owners, taxing capital gains has always been considered political suicide, which is, of course, why no-one’s done it. But therein lies the rub – in order to make it a politically acceptable policy, they’ve had to make it a bad policy. GST is (at least until the next time Labour wins an election) an efficient tax. Nothing is exempted, and it’s simple to administer. A CGT could also be efficient in the same way, but this isn’t what Labour’s proposing. Instead, their policy is to create two inefficient, administratively difficult taxes, a CGT and a broken GST.

It’s a shame, because seeing as they pretty well can’t win this election anyway, Labour putting forward a high-quality CGT proposal would have enabled a constructive debate on the subject.

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2 comments on “Labour grasps the nettle. And injures itself.

  1. Frank Davis says:

    Love it , already a dedicated follower , very well put arguement but if only we could get the socialists to read and understand
    Even glaring examples of the worst of these excess’ as shown in England as we speak generates only other wimps excusing rampant abuse of welfare , outright theft and vandalism as a direct product of the poor little dears being marginalised and their expectations not being met

  2. Indeed.

    As a former socialist, I know they mean well. They genuinely do want to help. But the law of unintended consequences is pretty unforgiving. Unfortunately, every time their big-government policies fail, they conclude that the solution is even bigger government.

    There’s a lot to be said for self reliance.

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