Rue Grewal: Labour’s tax-and-spend trap is a lesson we should have learned by now | Conservative Home

Rue Grewal is a Three Rivers District Councillor and Deputy Chair of Hertfordshire Conservatives Area Management Executive.

I have said time and time again that if the Conservative Party is serious about rebuilding, we must start with economic policies that people can understand and get behind.

In my councillor surgeries and conversations in my community and on the doorstep, it’s clear what matters most to people: the rising cost of living, soaring taxes, and a growing sense that hard work is being punished rather than rewarded. From fuel and train fares to household bills and small business costs, people are struggling—and they want a government that will make their lives easier, not harder.

Unfortunately, Labour’s first Budget has done exactly what history tells us Labour governments do best: tax, spend, rinse, repeat. With a £40 billion tax hike, Rachel Reeves and Keir Starmer are proving that old Labour habits die hard. Unlike the Chancellor, I don’t go around calling myself an economist—though with an economics and finance degree, I’m at least aware that punishing investment, job creation, and aspiration is not a recipe for economic growth.

This isn’t just about tax increases—it’s about how Labour’s economic model is shaping Britain’s future. Whether it’s their inheritance tax squeeze on family businesses, capital gains tax hikes discouraging entrepreneurs, or crippling increases in employer National Insurance, every one of these changes makes it harder for ordinary people to get on, save, invest, and grow. And let’s not forget their school fees VAT grab, which risks overwhelming state schools while simultaneously restricting curriculum freedoms for academies.

But here’s the key point: we have been here before. History shows that high-tax, big-state Labour economics always ends the same way—higher unemployment, sluggish growth, and a call for the IMF before you can say “Winter of Discontent”. Contrast that with successful Conservative economic policies—whether it was Nigel Lawson’s tax-cutting boom of the 1980s, Ken Clarke’s fiscal responsibility of the 1990s, or George Osborne’s focus on reducing business taxes to drive growth. Time and again, when Conservatives cut taxes and champion enterprise, the economy flourishes. When Labour taxes and spends, Britain stagnates.

So, let’s break down where Labour is going wrong, what history tells us about tax-and-spend policies, and—most importantly—how we, as Conservatives, should be making the case for a different path. Because if we don’t start offering real, compelling alternatives, we risk becoming little more than commentators on Labour’s economic mismanagement, rather than the party that puts Britain back on track.

Labour’s Attack on Inheritance Tax (IHT): A Tax on Family Success

Labour’s decision to freeze inheritance tax (IHT) thresholds until 2030, include unused pensions in estates, and cut relief on farmland, AIM shares, and commercial assets is nothing short of a war on family businesses. This isn’t about taxing the super-rich—it’s about penalising families who want to pass something down to the next generation.

Milton Friedman famously argued that inheritance tax discourages capital formation and punishes thrift, which leads to less economic growth in the long term. Britain already has one of the most punitive inheritance tax systems in the developed world, and Labour’s changes will only force more people to liquidate family businesses and farms, rather than passing them on.

By contrast, the Conservatives have historically defended family businesses (my own parents bought their business in the 70’s and thrived under a Thatcher government)—introducing IHT reliefs, residence nil-rate bands, and exemptions for agricultural land to protect generational wealth and investment. The solution isn’t Labour’s tax grab—it’s to simplify IHT, raise thresholds, and encourage private wealth creation rather than stifling it.

Capital Gains Tax Hikes: Killing Investment and Innovation

Labour’s decision to increase Capital Gains Tax (CGT) rates from 10%/20% to 18%/24% is yet another example of economic illiteracy. As Arthur Laffer demonstrated with his famous Laffer Curve, increasing tax rates beyond a certain point reduces revenue because investors simply stop selling assets.

We’ve seen this before: in the 1980s, Nigel Lawson slashed CGT and income tax, leading to an investment boom and record tax receipts. Similarly, George Osborne cut corporation tax and capital taxes—and the UK became the fastest-growing economy in the G7. Labour is taking us in the opposite direction, punishing entrepreneurs, investors, and pensioners who rely on CGT rates to make long-term financial decisions.

Rather than punishing investment, the government should be incentivising British entrepreneurs with:

• Maintaining Business Asset Disposal Relief (BADR) at 10% to encourage start-ups.
• Raising the Investors’ Relief lifetime limit to attract more capital into British businesses.
• Restoring indexation relief to prevent capital gains tax from punishing long-term investment.

Employer NICs Increases: A Job-Killing Tax

Labour’s 1.2 percentage point increase in employer NICs is yet another stealth tax on jobs. The Office for Budget Responsibility (OBR) itself estimates that 60% of these increased costs will be passed to workers and consumers, through either lower wages, higher prices, or job cuts.

Historically, when the Conservatives cut employer NICs, job creation soared. Under Ken Clarke in the 1990s, business-friendly policies helped reduce unemployment from 10% to below 6%. Under David Cameron and George Osborne, NIC cuts supported record employment levels.

Labour’s model, on the other hand, is to make hiring more expensive, which will reduce business expansion and job creation—a lesson we should have learned from previous high-tax Labour governments.

VAT on Private Schools: Ideology Over Pragmatism

Labour’s VAT on private school fees is a classic example of a policy that hurts the very people it claims to help. Even the government’s own figures predict 37,000 pupils will be forced into the state sector, increasing class sizes, teacher shortages, and strain on already stretched local authorities.

Conservatives have always championed educational choice and excellence—whether through free schools, academies, or private institutions. If Labour truly cared about improving education, they’d focus on raising standards, not restricting access.

Conclusion: Time for a Conservative Counter-Narrative

Labour’s Budget is a lesson in how not to run an economy—punish investment, stifle growth, and make work and success less rewarding. This is exactly what Labour did under Harold Wilson in the 1970s, Gordon Brown in the 2000s, and now Keir Starmer and Rachel Reeves in 2025. The result is always the same—economic stagnation, declining productivity, and a struggling workforce.

As Conservatives, we need to offer a compelling alternative. That means:

• Cutting taxes to stimulate growth, not strangling it.
• Defending family businesses and rewarding enterprise.
• Protecting jobs and ensuring businesses thrive.
• Giving parents real choices in education.

If we don’t stand for these things, then what exactly are we for? It’s time to make the case—not just against Labour’s tax hikes, but for a dynamic, growing, and opportunity-driven Britain.