Reeves: I will take on the tax dodgers to fund our NHS

Shadow Chancellor Rachel Reeves will tomorrow [9 April] pledge to raise over £5 billion a year to fund Labour's pledges for the NHS and breakfast clubs, as she unveils the party's new plan to crack down on tax dodgers.

Under the Conservatives, the gap between the amount of tax owed and what the government collects was a staggering £36 billion in 2021/22, whilst the number of civil investigations opened by HM Revenue & Customs' (HMRC) fraud unit has fallen by more than half in five years.

The head of the National Audit Office has recently said that there is £6 billion a year that could be recovered through a concerted effort on tax avoidance. However, under the Conservatives' plans only £1 billion a year in outstanding tax debt will be recovered.

Speaking ahead of a visit to a hospital in Manchester with the Shadow Health Secretary Wes Streeting, Rachel Reeves will vow to “take on the tax dodgers because if you make your homeand do your business in Britain, then you should pay your taxes here too.”

The Shadow Chancellor will announce a new target to raise £5.1 billion per year by the end of the next Parliament through Labour's new plan to slash the tax gap. Under the invest-to-save plan, up to £555 million of additional funding will go to HMRC each year to boost tax income by:

• Bolstering the number of compliance officers working out of the tax office by up to 5,000 to increase the number of investigations, tackle fraud and ensure tax owed is collected.

• Investing in digitisation of the tax office to improve compliance rates and customer services, and free up resources to focus on more complex cases.

• Working with businesses, the tax profession and digital service providers to bring a new focus to HMRC's modernisation, including greater use of AI – learning from industry and best practice overseas to make sure its scope is ambitious, whilst having new, achievable timescales for delivery.

The plan outlines legal and regulatory changes that a future Labour government would consider introducing to tackle tax avoidance too, including requiring a wider range of tax schemes to be reported to HMRC under the disclosure of tax avoidance schemes regime.

The plan would raise a net £0.7 billion in 2025/26, rising to £5.1 billion a year by the end of the parliament. Labour will also announce today plans to raise £2.6 billion over the course of the next Parliament – including a £1 billion in year one – by closing the loopholes in Rishi Sunak's non-dom plan.

Reeves will confirm today that £2 billion of the funding raised each year from these plans will go towards Labour's commitments to tackle NHS waiting lists and extra dental appointments, and funding free school breakfast clubs for every primary school pupil.

Rachel Reeves, Labour's Shadow Chancellor of the Exchequer, said:

“At a time when working people in Britain are being asked to pay more in tax because of the Conservatives' economic failures, it is wrong that a minority continue to avoid paying what they owe.

“After fourteen years in power, the Conservatives have failed to tackle this issue and the tax gap remains unacceptable high. With Labour, things will change. We will take on the tax dodgers because if you make your home and do your business in Britain, then you should pay your taxes here too.

“The plan we are announcing today will give HMRC the resource it needs to go after those who are avoiding or evading tax, and to modernise the tax office so we have a system that is fit for purpose.”

On funding Labour's commitments to the NHS and breakfast clubs, she added:

“I have been clear that everything in our manifesto will be fully costed and fully funded. There will be no exceptions. That is why last month I promised to go through all the government documents in an orderly way to identify the funding streams to honour our commitments to the NHS and schools.

“That process is now complete and the funding a future Labour government will raise from taking on the tax dodgers will fund more appointments in NHS hospitals, new scanners, extra dentist appointments and free breakfast clubs for all primary school pupils.

“Our schools and our hospitals are the British people's priorities – and they are Labour's priorities too.”

Ends

Notes to editors:

Labour's plan to close the tax gap

• A copy of Labour's plan to close the tax gap can be found attached.
  
  
• The tax gap for 2021/2022 was £36 billion. Source: https://www.gov.uk/government/news/tax-gap-holds-steady-at-48#:~:text=The%20estimated%20tax%20gap%20for,%2Dtime%20low%20of%204.8%25.&text=The%20amount%20of%20unpaid%20UK,revealed%20today%20(22%20June)
  
  
• The number of civil investigation cases investigating offshore, corporate and wealthy taxpayers by HMRC has fallen by more than half in five years.Source: https://www.theguardian.com/politics/2024/feb/18/hmrc-investigations-of-wealthy-tax-dodgers-halve-in-five-years
  
  
• Gareth Davies, Chief Executive of the National Audit Office, has said that £6 billion could be raised by the Treasury in cracking down on tax evasion and avoidance.Source: https://www.ft.com/content/778af0b1-f93c-4b78-b980-0cf6da9be6f0

Closing Rishi Sunak's non-dom loopholes

• Labour supports most aspects of the proposed replacement to the non-dom rules, but we are concerned that major loopholes remain.
  
  
• That is why Labour will include all foreign assets held in a trust within UK inheritance tax, whenever they were settled, so that nobody living here permanently can avoid paying UK inheritance tax on their worldwide estates.
  
  
• The Government should have included this in their consultation as an option but instead have ruled it out. Not doing this will mean hundreds of billions of assets permanently shielded from UK inheritance tax, with approximately £430 million in inheritance tax foregone a year.
  
  
• In addition, Labour would not give a 50% discount in the first year of the new rules. Not doing this will raise £600 million.
  
  
• We will consider whether there should be an investment incentive during the four-year window, so that UK investment income is free of UK tax and not disincentivised versus investment elsewhere in the world.
  
  
• We are also concerned that after the two-year window for stockpiled foreign income and gains (FIG) there will remain sizable stockpiled FIG overseas and a huge disincentive to bring it to the UK. So we will also explore ways to encourage people to remit stockpiled FIG to the UK, so that we can end the legacy of the current non-dom rules.

Labour's NHS and breakfast club commitments:

• Providing 2 million more operations, scans, and appointments a year on evenings and weekends, with £1.1 billion paid to staff in overtime (cost: £1.1 billion)
  
  
• Doubling the number of NHS scanners, buying AI-scanners which work 35% faster, to diagnose patients earlier (cost: £170 million)
  
  
• Delivering 700,000 urgent dentistry appointments, recruiting more dentist to areas most in need, and introducing supervised toothbrushing for 3-5 year-olds (cost: £109 million)
  
  
• In total, the plans for the NHS will cost £1.6 billion, including Barnett consequentials.
• Labour would use a further £360 million to introduce breakfast clubs in every primary school will cost, including Barnett consequentials.
• Over the course of a parliament, the measures announced raise almost twice as much as our NHS and breakfast clubs spending plans. Together with the other revenue raisers we have already announced, this means every policy Labour will put forward in its manifesto will be fully funded in every year and comply with our fiscal rules.