Reforming Reform’s Manifesto

Between populism and technocracy

Reform UK’s five ‘core pledges’ in their Manifesto for the 2024 General Election.

Back in June, Pimlico Journal published ‘Ten policies for a better Britain’, in which we outlined some policy ideas for the Right in advance of the upcoming election. One thing we hoped to achieve through our article was influencing the then-unpublished Reform Manifesto. How did they do?

From the perspective of the Pimlico Journal, all the manifestos of the major parties at the 2024 General Election were something of a disappointment. However, the Reform Manifesto was still the best by some distance. Their positions on Net Zero (against) and immigration (much less of it) alone easily put it ahead of the Tory Manifesto, let alone the Labour Manifesto. On the former, Reform pledged to get rid of the entire edifice of Tory Net Zero policy: an excellent start, even if details were thin and technical policy expertise somewhat lacking. On the latter, Reform promised to leave the ECHR, to securely detain asylum seekers (perhaps offshore) while we process their claims, to deport foreign criminals after their sentence, to bar student dependents, and — more intriguingly — promised to introduce a higher rate of National Insurance for foreign nationals in order to encourage employers to hire British workers.

With immigration, we can, however, criticise the Manifesto for — somewhat inexplicably — making no firm commitments on numbers, and (rather stupidly) opening their policies up for obvious subversion by only seeking to freeze ‘non-essential’ immigration; something which, as the Tories now know all too well, is an inherently slippery concept. Not promising to scrap the ‘social care’ visa route and failing to tighten the path of foreign residents to ILR and/or citizenship were also big failings.

Even outside of the two core Reform issues of Net Zero and immigration, there were many other good pledges in the Manifesto: repealing the Equality Act 2010, big cuts to foreign aid, reductions in stamp duty, more prison spaces, more pupil referral units (PRUs) for violent and disruptive students, deportation of grooming gang members with dual nationality, restricting the right of foreign nationals to social housing (though not strongly enough), opposing the Online Safety Bill (though not strongly enough), reform of leasehold, bans on ULEZ and other restrictions on drivers, lifting caps on medical courses, reform to postal voting, narrowing the definition of ‘hate crime’, a ‘Free Speech Bill’ (though this was vague), an end to the license fee, and so on. There were even a couple of somewhat surprising (in a positive way) inclusions: for instance, a pledge to scrap the ‘VAT tourist tax’ — something that has received almost no attention from the British public, but would be a welcome change — and opposing the misguided Renters’ (Reform) Bill. Another major Reform policy that has received very little attention, ending the payment of interest on central bank reserve account balances, is intelligent, and deserves more praise: it would save tens of billions. Indeed, for this reason it is a policy that has already won support from ‘wonks’ across the political spectrum, although few ever acknowledged that Reform have now adopted it.

Unfortunately, despite the Reform Manifesto’s many strengths, it still fails on two main grounds. The first is that Reform’s tax and spending pledges are simply abysmal, radically shallowing the British tax base at the worst possible time. We can only hope that some of these pledges were made because Reform never expected to be in power after the General Election. The second is that Reform, despite a few promising pledges listed above, still has no real analysis of how the British state works, which will make it impossible for them to move the country in the direction that they (and we) want.

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Reform’s Tax and Spending Muddle

Perhaps the most egregious elements of the Reform Manifesto are their pledges on tax and spending — especially tax.

Other political parties are just as guilty of some of the ‘sins’ on tax in the Reform Manifesto: for instance, claiming that unspecified ‘billions’ will be saved by means of more funding and staff for HMRC and improved anti-avoidance measures. This is always an easy way to plug inconvenient holes in your manifesto’s tax and spending pledges. The reality is that nowadays, tax avoidance/evasion is increasingly concentrated around two main groups: (1) the internationally mobile using low-tax jurisdictions to legally reduce their tax bill; and (2) small businessmen, often plausibly or actually dealing with lots of cash, breaking the law by simply misreporting their income.

So long as you don’t take the radical step of actively lying to HMRC about what you earn, it seems to have become very difficult indeed for those both living and earning here to avoid paying income tax, which is the most important tax in Britain by some distance. A very high proportion of those who have attempted to use ‘schemes’ to reduce their income tax bill — such as through converting income to capital gains — seem to have ended up getting rinsed, and sometimes bankrupted, by HMRC’s increasingly aggressive (and sometimes retroactive) anti-avoidance provisions. We aren’t frozen in 2010: you can only pick the low-hanging fruit of easily implementable anti-avoidance provisions once.

Shaking down (1), the highly internationally mobile, is both exceptionally difficult and, in large part, out of the British Government’s control, probably requiring high-level international cooperation and (most likely) American coercion of tax havens. Cracking down on (2), the illegal underreporting of income in small businesses, would be obviously at odds with Reform’s broader policy platform, both because of the investigation and surveillance this would seem to entail and because this would directly hurt the material interests of many of their voters. Another option might be to target the avoidance of inheritance tax, which would be difficult, but not impossible. This, however, would also be unpopular with Reform’s core voter base, who hate inheritance tax, usually thinking it is unfair and immoral (even if they won’t actually have to pay it).

Similarly meaningless is Reform pledging a ‘major simplification’ of the tax system. Reform are, of course, correct that the British tax code is ludicrously convoluted. However, it is much easier to complain about this (with no specifics given) than it is to actually fix it. In any case, obvious methods of reducing tax complexity — such as abolishing zero and reduced rates for VAT — are a political no-go.

Radical tax shallowing is inherently left-wing

The biggest problem by far, however, is Reform’s addiction to making Britain’s tax base even more shallow than it already is; something that has been a problem in Britain for a long time, and became steadily worse under the previous Conservative Government. It is in these pledges that we can see Reform’s ‘populism’ at its most damaging.

Some of these ‘tax shallowing’ pledges are basically inconsequential, such as scrapping inheritance tax on estates below £2,000,000. In this case — completely leaving aside the morality of both inheritance and inheritance tax as concepts for now — they should frankly be bolder and just go ahead and scrap the tax altogether, saving on administration costs in the process, as this pledge would pull a very large proportion of the mostly medium-sized estates that actually do pay inheritance tax below the minimum threshold (since we must remember that most large estates are already structured so as to pay very little tax). This is especially the case when we remember that this pledge is paired with another pledge to give those few people who do still end up paying inheritance tax the option to donate to charity instead of handing their money over to the government. What’s even the point of keeping inheritance tax if you do all this?

Other pledges, however, would be catastrophic in the unlikely event that Reform ever came to power. The worst of all is Reform’s pledge to increase the tax-free personal allowance from £12,570 to £20,000. This pledge is paired with a promise, ‘as soon as finances allow’, to increase the tax-free personal allowance for married couples to £25,000 for either spouse. These are undeniably popular pledges. It is no surprise that Reform have made sure to trumpet them wherever and whenever they can; indeed, their pledges on the personal allowance became one of the three main planks of Reform’s policy platform at the last election, alongside scrapping Net Zero and cutting immigration.

Let us leave aside just how expensive this would be for now (Reform’s guess of how much it would cost is surely an underestimate); instead, let us start out by noting how ridiculous it is that any party that claims to be ‘right-wing’ could ever support such a pledge. While of course it is true that increasing the tax-free personal allowance is not as bad as simply increasing benefits or other explicit forms of redistribution, the internal logic of such a pledge will — even if this is not intended on Reform’s part — almost inevitably lead to higher taxes on ‘high-earners’, especially if it is not paired with sizeable spending cuts (which, as we will soon see, it is not).

It should be remembered that on many measures, the British tax system is already one of the most progressive in the world. In particular, it raises relatively little from social security contributions and payroll taxes — which tend to be less progressive than income tax, and in other European countries, what is paid in via these taxes is usually more closely linked to future benefits paid out than in Britain — and, by international standards, it levies relatively low rates of income tax on low- and medium-earners, in part due to a relatively generous personal allowance.

Increasing the personal allowance to £20,000 would make it even more so. As Paul Johnson of the Institute for Fiscal Studies notes:

In his budget speech Jeremy Hunt made the following statement. “The average earner in the UK now has the lowest effective personal tax rate since 1975 — and one that is lower than in America, France, Germany or any G7 country.”

Given that the overall tax burden — the tax take as a fraction of national income — is reaching record levels, it is a remarkable claim. I have neither heard nor seen much commentary on it. Paradoxically that might well be because it is demonstrably true. Average earners really are facing lower levels of direct taxation than they have in 50 years.

The basic rate of income tax has come down from 35 per cent to 20 per cent over the past 50 years. The tax-free [personal] allowance is being squeezed, but it is still at historically high levels following big increases during the 2010s. And while, at 8 per cent, the main employee element of national insurance is higher than it was in the 1970s, it is lower than at any time since 1982.

Someone on £35,000 today — about the average for those working full-time — faces an income tax and national insurance bill getting on for £2,000 lower than would someone on the same real earnings back in 2010.

So how does the British state fund itself, given that it has combined a near-record size with a dramatic shallowing of the tax base? In short, through ‘soaking the rich’:

Someone just about in the top 1 per cent of income tax payers, on £200,000, say, will be paying a good £10,000 a year more than in 2009. Our reliance on top earners has continued to grow. That top 1 per cent pay 29 per cent of all income tax now, up from 25 per cent in 2010 and 21 per cent at the turn of the century. Whisper it quietly, but this Tory government has taken a serious chunk out of the incomes of the 1 per cent.

Britain’s fiscal reliance on a relatively small number of people has already become a serious problem. Reform are pledging to make it much worse.

It seems that Reform do not really have any coherent idea of how economic growth can be achieved, at least beyond scrapping Net Zero (which is, of course, very good). In the end, they have fumbled around and arrived at ‘have fewer people pay taxes’ and ‘give favoured group a tax break’, without thinking through any of the second-order consequences of these things. Reform presumably believe that high marginal rates of tax can dull economic incentives. Such a high personal allowance would almost inevitably — especially when we consider the dubiousness of Reform’s pledged spending cuts (more on this later) — lead to even more pressure on ‘high-earners’ (not that ‘high-earners’ are really earning that much in this country anymore). Is this really what a ‘right-wing’ party should be aiming for?

Moreover, taking such a large proportion of the workforce entirely out of income tax also contributes to an unhealthy political culture. Quite aside from ‘Left’ and ‘Right’ arguments about the merits and demerits of redistribution, or practical concerns about how to finance the British state, it is in my view generally beneficial that everyone in work pays at least some income tax, even those who are ultimately not net fiscal contributors. This is because, if only on the psychological level, paying this tax will connect a greater proportion of the population to the fact that government spending is not a ‘free lunch’, as so much of the British population seems to believe today.

Now from the catastrophic to the merely damaging, yet bizarre: Reform’s pledge for ‘all frontline NHS and social care staff to pay zero basic rate tax for 3 years’. I do not think that readers of this journal need it explained to them why it is bad to give special tax treatment to workers in certain sectors. It is worth considering where such a bizarre pledge even came from: are they so afraid of increasing government spending that they feel the need to disguise it as a ‘tax cut’?

Populist bungs to small businesses: out of control

Moving quickly on from the damaging, yet bizarre, to the damaging, but hardly bizarre: another notably bad Reform pledge is to increase the threshold at which firms need to register for VAT to £150,000. Once again, this would be expensive and would seriously shallow the British tax base; however, in this case, the problems do not end there. We should first admit that, much like the tax-free personal allowance pledge, this is a popular (and indeed ‘populist’) pledge: there is no point in us denying that VAT is widely despised by businessmen — principally because of the administrative burden and high de facto marginal rates it imposes upon registration (at least in an ideal world, in which VAT-registered firms do not compete with VAT-free firms (something that is not always true), much of the actual cost of VAT can just be passed on to the customer). Nonetheless, it is ultimately a preferable way of raising revenue to almost all of the other options, as it taxes consumption rather than investment, and, for all of its flaws, it still remains less economically distortionary than most other taxes; furthermore, those distortions that do exist due to VAT are usually due to the poor implementation of the tax in Britain rather than the tax’s inherent failings. And while it is true that all taxes are basically bad, since Reform aren’t genuinely committed to rolling back the frontiers of the state they will have to try to pick the best of a bad bunch.

The serious economic distortions created not by VAT itself, but rather by the existing VAT threshold of £90,000 — itself an international outlier in how high a threshold this is, making Reform’s policy doubly absurd — are already well-known. The relatively high threshold creates extreme ‘bunching’, where modestly successful firms avoid expanding in order to avoid being forced to register, which is administratively burdensome and expensive. Other economic distortions relating to company structure are also created by the current VAT threshold. As the Adam Smith Institute’s Sam Dumitriu notes:

Companies below the threshold often compete with firms registered for VAT. For instance, most Uber drivers turnover under £85,000 [the old threshold] which means your average Uber ride is almost VAT-free (you pay VAT on Uber’s cut). If a competitor that employed its drivers directly entered the market, it would be forced to pay VAT in full on each journey. So, the VAT registration threshold might not simply discourage productive activity, it may also lead to inefficient corporate structures.

Reform’s pledge to increase corporation tax’s minimum profit threshold to £100,000 (the current threshold for the lower rate is £50,000) would lead to similar economic distortions as the VAT pledge, which we need not repeat, though it would not be quite as damaging due to corporation tax being less administratively burdensome and not imposing such extreme cliff-edge marginal rates as VAT currently does. It would, however, also be expensive. In a similar vein, Reform are also promising to scrap the new IR35 rules.

Ultimately, the pledges on VAT, corporation tax, and IR35 should be seen as a bung to small businessmen, who are correctly believed to be a critical pillar of Reform support. This is understandable — indeed, an inherent part of politics will always be rewarding your own supporters — but they still go too far in their populism.

Rolling back the frontiers of the state… or not?

In general, Reform were not promising too much in the way of increased spending, as opposed to costs borne due to reduced taxation (although, as we have already noted, Reform do like to disguise increased spending through reducing taxation). A few billion here and there can be identified: more ‘bobbies on the beat’, more prisons, subsidies for those using private education and vouchers for healthcare (as J’accuse have noted, the latter in particular does not seem like a very good idea), and some ‘industrial policy’ pledges for farming, fishing, and arms manufacturers, but nothing too crazy. The main exceptions are promises of fairly sizeable increases in defence (which is a mistake) and health (which is probably inevitable, both politically and otherwise) spending. (We can at least be glad that Reform have clearly moved on from irritating NHS worship.)

However, the cost of reducing taxation alone is very expensive, even according to Reform’s own estimates. How will this be funded?

Unlike some commentators, I do in fact believe that £5 for every £100 could, in theory, be found from their policy to ‘slash wasteful spending, cut bureaucracy, improve efficiency and negotiate better value procurement without touching frontline services’. However, this is exactly the sort of vague pledge that, when in government, will be easy for Civil Servants — who, naturally, will not want to do this — to ignore. A somewhat less vague and more easily enforceable pledge would be a commitment to reduce the headcount of the Civil Service by, say, 10%.

Sadly, the hard truth is that at some point, if they are truly committed to such aggressive tax cuts, Reform need to bite the bullet and start talking about the government doing less. Of course, it is true that they do talk a bit about cuts, but it remains the case that a full third (£50bn out of £150bn) of the money that Reform will allegedly save from their manifesto comes from the ‘slash wasteful spending’ pledge alone — more than any other pledge, dwarfing the £15bn of savings promised from reducing the benefits bill (how this will be achieved is mostly unspecified). Another £35bn will be saved from ending interest payments on ‘QE reserves’ (which isn’t really a spending choice at all, but rather is a technical policy completely unrelated to frontline government services), and £4bn will be brought in from levying a higher rate of employer national insurance on foreign nationals. The only other areas in which Reform seem to be promising real cuts are in transport and utilities (£5bn saved per annum, mostly unspecified, plus one-off savings of £25bn from scrapping HS2), the environment (£20bn saved from scrapping Net Zero), and immigration (£5-10bn of, once again, mostly unspecified savings).

Pimlico Journal tends to avoid discussing political strategy too much. Of all the things to leave to the professional politicians, this one is up there: it is they, not us who are forced to spend much of their day interacting with the ‘general public’. We should acknowledge that practical politics will almost always call for the making of policies that, to a greater or lesser extent, are of direct financial benefit to your core support base: hence the disproportionate attention that Reform give to farming and fishing; issues of marginal importance to the average British voter, but not the average Reform voter, given the constituencies that Reform does well in. As we have noted, the exact same can be said of all the pledges that quite transparently benefit small businesses, as well as the pledges that help people who are in work, but not earning much. I have no doubt that Reform’s pledges on the tax-free personal allowance, VAT, corporation tax, and IR35 are ‘popular’; and, to some extent, popular but imperfect policies are an inherent part of politics, so long as you want to win. Nonetheless, it is clear that on tax and spending, Reform has gone too far in the ‘populist’ direction. If they are serious about becoming a party of government, they need their ‘populist’ tax and spending pledges to be watered down with a good dose of hard-headed right-wing technocracy.

I fully accept that, for the most part, improving the tax system in an outright ‘technocratic’ direction will almost always be unpopular. Probably the most obvious target of ‘policy wonks’, abolishing zero and reduced rating for VAT (greatly reducing tax complexity while raising an estimated £24bn in the process), would be difficult for all but the strongest of governments, even if paired with compensation for low earners through the broader tax and benefits system. Another obvious target, making council tax more fair by revaluing and rebanding in order to take into account changes in house prices since 1991, would be all but politically impossible: just one story about a little old lady in a now-expensive house she bought for a few bottlecaps in 1972 who can’t afford to live there anymore, and it would be toast.

It is one thing to not reform the tax system: it is another thing to blow it up with populist rubbish. Undoing bad tax policies can be fiendishly difficult; often, it is only politically possible through allowing inflation to erode away thresholds (so-called ‘fiscal drag’). It is for this reason that adding yet more potentially politically irreversible stupidity to our tax system is so utterly unacceptable. It should always be remembered that while it is difficult to make our tax system better, it is very easy to make it much, much worse.

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The Theoretical Void at the Heart of Reform

Have Reform learned nothing from the past fourteen years? There is, as we will see, an intellectual and theoretical void at the heart of Reform that can no longer be ignored. I am, of course, talking about the Party’s lack of a theory of the state. This means that it seems all but inevitable that, should they ever come to power, they’ll repeat all of the same failures of the Tories, who had rings run around them by the machine while occasionally throwing out a press release saying that they were going to ‘cut waste and inefficiency’ and ‘end Wokeness’ — irritating the Centre through their rhetoric, and the Right through their lack of concrete achievements. In order to grasp power, you first need to grasp the nature of it.

The Good: an end to the ‘localist’ dead-end

It isn’t all bad, however. I am pleased to say that, for all my criticisms of Reform, it remains the case that they have purged themselves of some of the worst aspects of the noughties Right. For instance, there there is not even a hint of ‘localism’ in the Manifesto: the word ‘local’ appears only five times in the entire document, and there is no proposal anywhere to devolve powers away from the centre.

As you would expect, Reform support proportional representation. We can debate whether this is good or bad for the Right at a later date, but it obviously makes sense for a small and geographically dispersed party like Reform to oppose first-past-the-post. Some other good policies, such as leaving the ECHR, are listed in the first section of this article.

Nonetheless, it is clear that Reform still lack a proper understanding of where actual power lies, and how certain elements of the British state can so effectively subvert the will of elected politicians. This lack of understanding is made obvious by two of Reform’s more dangerously misguided policies concerning (broadly speaking) the ‘machinery of government’.

The Bad: enabling your enemies

The first of ‘The Bad’ is the pledge to ‘launch an Anti-Corruption Unit for Westminster’. It seems clear enough what Reform are trying to achieve with this pledge: they want investigations into COVID procurement.

This seems sensible, and moreover it is popular. But if this is what they want, then they should be more specific. Instead, Reform propose a generalised, free-floating unit, with no expiry date, no real ministerial control, free to investigate whoever they like, for whatever reason they like. Can you imagine how politically dangerous this is, especially if put into the hands of someone as sinister, malicious, and dishonest as Sue Gray? The use of ‘corruption’ investigations, often dubious or outright fraudulent, to persecute political opponents is nothing new: one only needs to look at countries like South Korea and (most notoriously) China to see that this is the case. Gray has already made the most of ‘propriety and ethics’ to do similar things with the tools she has in Britain. It is absurd that anyone would want to give such a noxious figure even more powerful tools to play with.

The second is Reform’s proposal to replace the House of Lords with an elected upper chamber. Why? What possible benefit would there be from this? The current House of Lords is ridiculous, but at least it still serves one purpose: many of the more technically complex Bills are only made possible because of the interventions of the appointed upper chamber. This one remaining function would inevitably disappear as soon as the upper chamber becomes an elected body, suffering from all of the well-known failings of the Commons.

All an elected upper chamber would do is duplicate work and cause gridlock; something that is acceptable in a country where everything is working well and change, generally speaking, is bad — but this is not the situation we find ourselves in Britain. Why would you add more people who can block you from doing what you want in Government, given the already extreme tendency towards inertia that is inherent within the present system? Either keep it as it is (and flood it with your own appointees if absolutely needed, especially to give ministerial roles to those who are not MPs), or abolish it entirely and move to a unicameral system.

The Pointless: what Reform haven’t learned from fourteen years of Tory Government

Most of the rest of Reform’s policies on the machinery of government are not exactly ‘dangerous’: it is more that they will not achieve anything. The best example is Reform’s pledge to ‘replace Civil Service leaders with successful professionals from the private sector, who are political appointees, who come and go with the government’. There is nothing much wrong with the second half of this statement: the problem with this is not the ‘politicisation’ of the Civil Service, which is something that does suggest some degree of thought on this topic from Reform. Rather, the problem is believing that appointing ‘successful professionals from the private sector’ will greatly improve things. This is, after all, something that has been tried many times before, without much success.

J’accuse responded to the proposals with predictable snark, writing that

…what “put top Business people in government” means, in this context, is that Dick and Nige will do a whip-round at some Rotary club in Saffron Walden and see which gouty Freemason fancies a crack at running the police… it is deliberately incompetent and anti-meritocratic…We do not imagine Team Farage will get rid of every civil servant and privatise the state, ergo, the “Top business people” will be more like an artificial limb grafted onto the old, rotten apparatus at the Cabinet level.

This is obviously more than a little unfair, but that isn’t to say that such a response to their proposals wasn’t deserved, at least in part.

One of the few legitimate criticisms of Margaret Thatcher is that, through working to decentralise and marketise government, she unintentionally assisted the growth of the Blob. It is important to understand that the logic of ‘competition’ and ‘hiving off’ is something that has always been associated both with businessmen in government and with the Blob, and it is not so difficult to see how the two, by both seeking to circumscribe and disperse executive power, could become interlinked: in this way, something that was originally coded as ‘right-wing’ became the monster that it is today. In the current moment, where the problem in British government is not merely inefficiency, but the inability to make any kind of changes, good or bad, this is a deeply unhelpful direction for a ‘right-wing’ party take things. Even in a best case scenario, these businessmen will, as J’accuse notes, merely be ‘grafted onto the old, rotten apparatus’, ending up adding another layer of complexity rather than cutting through all of it: what’s the point?

It should be noted that you don’t even need to resort to complaints about ‘meritocracy’ (or lack thereof) in order to criticise such an understanding of the British state and how best to reform it. Ultimately, all we need to say is that while there is some overlap in skillset between business and government, it is far from complete.

For instance, in business, there is a clearly identifiable goal: maximising profit. What is the equivalent in government? Most of the time, you will have multiple goals that need to be balanced against each other, which requires somewhat different talents. In business, you are only beholden to the shareholders; beyond that, there are not many restrictions on what you can do. By contrast, in politics, you are beholden to far more external pressures, political and otherwise, which need to be effectively managed and played off against each other, and this is something that remains true even if you reject much of the logic of ‘stakeholderism’. You are also much more beholden to procedure. Procedure is of much greater importance in government than in business because of the legal and political structure of this country, and the general moral principle that all bureaucratic decisions should ultimately be explicable to outsiders if necessary. As such, there is very little room for oracles and gurus in government, even those who achieve good results. In sum, in government, you are much more inherently restricted in what you can do. Some businessmen adapt well to the new environment. Others do not.

This perhaps explains why the record of businessmen in government in this country has not, for the most part, been particularly impressive. Obviously, such a policy has populist appeal in a way that someone like Dominic Cummings’ preferred ‘technocratic’ policies do not, which is obviously important for an insurgent party like Reform. Yet Reform are kidding themselves if they think that this is the solution to our country’s problems. Even today, it seems that Cummings still does have his uses.