Very very damning front page for Labour on the Telegraph tomorrow. As someone who read economics at university and now work in finance the rhetoric that Labour are coming out with scares me quite a bit. The UK government currently taxes around 36.5% of GDP and spends around 41%. That is the 5% odd budget deficit we are running. No government in the history of the UK has managed to raise more than 38.5% of GDP through taxation. Even if Labour raise taxation to that sort of level, they will still have to have cut deeply. No two ways about it. You may think that this is good, less severe cuts, more spending on public services. The problem is most studies are now saying high levels of taxation slow economic growth. If the economy does not grow then there is no chance of achieving the tax revenues, in real terms, to pay down the budget deficit and then onto the public debt. Labour are now planning on clearing the current budget deficit but still borrowing £30bn for capital expenditure. I can generally get behind capital expenditure, except of course, the borrowing will be kept off balance sheet. The £1.4tn public debt figure relates only to current debt. Estimates put the off balance sheet debt at an additional £5tn - £7tn. These are the public sector pension liabilities, the state pension liabilities and most importantly all of the PFI debt which the Labour government of 1997 to 2010 used to fund capital expenditure in the UK at a massively inflated cost. Rachael Reeves had a car crash interview on Sunday morning where she said, essentially, the only tax rise she had planned was increasing the 45% tax rate back to 50%. Andrew O'Neil correctly said this could raise anywhere between £0 and £2bn. If the change in rate does nothing to increase revenue, or in fact decrease it, then it goes to show Labour are the party of envy rather than aspiration. Just as an amendment to that, believe it or not, the Laffer curve been fairly consistently correct. When the top rate of tax was massively cut in the 80's revenues sky rocketed. The coalition government has cut corporation tax and the revenues collected have increased. They cut the additional rate band and tax revenues increased. Why anyone would be compelled to raise taxes I do not quite understand given the damage it could do to revenues and freedom of choice for the individual.