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McDonnell defends decision to back tax cut for high earners McDonnell defends decision to back tax cut for high earners
(about 2 hours later)
The shadow chancellor, John McDonnell, has defended his decision not to oppose tax cuts for higher earners announced in Monday’s budget, amid a mounting backlash from Labour MPs. The shadow chancellor, John McDonnell, has defended his decision not to oppose tax cuts for higher earners announced in Monday’s budget, despite a mounting backlash from Labour MPs.
“We’re not going to take money out of people’s pockets: simple as that,” McDonnell told journalists. “We’re not going to take money out of people’s pockets. Simple as that,” McDonnell told journalists.
Philip Hammond brought forward by a year a Conservative manifesto pledge to increase the personal allowance to £12,500, and the higher-rate tax threshold to £50,000. The chancellor, Philip Hammond, brought forward a Conservative manifesto pledge to increase the personal allowance to £12,500, and the higher-rate tax threshold to £50,000, by a year.
Analysis by the Resolution Foundation published on Tuesday found the cuts, which will cost the Treasury almost £2.8bn, would overwhelmingly benefit wealthier households, with almost half the giveaway set to go to the top 10% of earners. Analysis by the Resolution Foundation published on Tuesday found the cuts, which will cost the Treasury almost £2.8bn, would overwhelmingly benefit wealthier households, with almost half the giveaway going to the top 10% of earners.
McDonnell surprised many on his own benches on Tuesday by saying that if Labour took power it would not halt the cuts, instead preferring its own tax increases, targeted on corporations and the top 5%. McDonnell surprised many on his own benches on Tuesday by saying that if Labour took power it would not halt the cuts, instead preferring its own tax increases that would target corporations and the top 5%.
Andy Burnham, the Greater Manchester mayor and former Labour leadership candidate, said the policy would be, “hard to justify at any time, because the benefit is skewed to the top half; but even more problematic given the pressure on public services.” Andy Burnham, the Greater Manchester mayor and former Labour leadership candidate, said the policy would be “hard to justify at any time, because the benefit is skewed to the top half, but even more problematic given the pressure on public services”.
Alison McGovern, the chair of the centre-left Labour-supporting group Progress, said: “We can’t support spending more on tax cuts for quite wealthy people than on dealing with the universal credit mess.” Alison McGovern, the chair of the centre-left Progress group, which is associated with Labour, said: “We can’t support spending more on tax cuts for quite wealthy people than on dealing with the universal credit mess.”
The Tottenham MP David Lammy said: ”These tax cuts leave a bitter taste in my mouth because they help high earners in the City far more than my constituents in Tottenham, some of whom this winter will be facing the choice between eating and heating. I believe it is a mistake for the Labour party to support this policy as it will lead to more inequality, not less. The Tottenham MP David Lammy said: “These tax cuts leave a bitter taste in my mouth because they help high earners in the City far more than my constituents in Tottenham, some of whom this winter will be facing the choice between eating and heating. I believe it is a mistake for the Labour party to support this policy as it will lead to more inequality, not less.”
And home affairs select committee chair, Yvette Cooper, said of the tax cuts: “This is wrong. I cannot support it.” The home affairs select committee chair, Yvette Cooper, said: “This is wrong. I cannot support it.”
People on £90-100k a yr will get tax cut worth £860 in April, those on £125k will get £600 - far more than low paid workers, at a time when child poverty going up, benefits being cut, vital council services being cut, police badly overstretched. This is wrong. I cannot support it pic.twitter.com/DQEjiLJEA2People on £90-100k a yr will get tax cut worth £860 in April, those on £125k will get £600 - far more than low paid workers, at a time when child poverty going up, benefits being cut, vital council services being cut, police badly overstretched. This is wrong. I cannot support it pic.twitter.com/DQEjiLJEA2
But McDonnell was unrepentant. “We’re not going to take funding away from people; some of these are middle-earners – headteachers and people like that, who’ve had a rough time of it, as well as everyone else,” he said. McDonnell, however, was unrepentant. “We’re not going to take funding away from people. Some of these are middle-earners, headteachers and people like that, who’ve had a rough time of it, as well as everyone else,” he said.
Instead of reversing Hammond’s giveaways, McDonnell said Labour would implement its own tax rises – including a new top rate of 45p for those earning over £80,000 a year, and reversing Conservative cuts to corporation tax. Instead of reversing Hammond’s giveaways, McDonnell said Labour would implement its own tax rises, including a new top rate of 45p for those earning over £80,000 a year, and reversing Conservative cuts to corporation tax.
“We want a fair taxation system, where the top 5% pay a bit more,” he said. And in response to Burnham’s criticism, he said: “I completely understand where Andy’s coming from; but what we’re into, is trying to ensure we have a fair taxation system based upon the new proposals on income tax that we’ve put forward, which he supported.” “We want a fair taxation system, where the top 5% pay a bit more,” he said. In response to Burnham’s criticism, he said: “I completely understand where Andy’s coming from, but what we’re into is trying to ensure we have a fair taxation system based upon the new proposals on income tax that we’ve put forward, which he supported.”
Under the income tax cuts announced by Hammond, the 20% tax band, which currently starts on earnings above £11,850, will rise to £12,500 next year, and the higher rate 40% tax band will begin at £50,000 from April, a jump from £46,350. Under the income tax cuts Hammond announced, the 20% tax band, which currently starts on earnings above £11,850, will rise to £12,500 next year, and the higher rate 40% tax band will begin at £50,000 from April, up from £46,350.
Earlier, Hammond defended his decision to implement tax cuts while admitting some government departments could experience further cuts, calling it “right and moral” that the Conservatives follow through on their manifesto pledges. Hammond had earlier admitted that the boost to NHS spending had implications for other departmental budgets.
The chancellor admitted that the boost to NHS spending would mean real spending remained flat for all other departments, though some, including defence, had been awarded extra cash. Other departments, however, were still likely to face a continued spending squeeze.
“We have made our choice to fund health very generously … that means our overall envelope of spending that is available, once you take out the commitment made to health, gives flat real spending available for all other departments,” Hammond told Today. “That’s a choice we make.”“We have made our choice to fund health very generously … that means our overall envelope of spending that is available, once you take out the commitment made to health, gives flat real spending available for all other departments,” Hammond told Today. “That’s a choice we make.”
He said the government had made a “very clear commitment” at the last election to raise the personal allowance and the threshold for higher-rate income tax. He also said the government had made a very clear commitment at the last election to raise the personal allowance and the threshold for higher-rate income tax.
“It is right and moral for a Conservative government to deliver on the commitments that we make in our election manifesto,” he said. “People have a right to expect that when politicians go before them in a general election and make a very clear commitment they deliver on that commitment.”“It is right and moral for a Conservative government to deliver on the commitments that we make in our election manifesto,” he said. “People have a right to expect that when politicians go before them in a general election and make a very clear commitment they deliver on that commitment.”
In contrast, almost three-quarters of welfare cuts announced since 2015 are to continue, including a £1.5bn benefit freeze next April that will result in a couple with children in the bottom half of the income distribution losing £200. Almost three-quarters of welfare cuts announced since 2015 are to continue, including a £1.5bn benefit freeze next April that will result in a couple with children in the bottom half of the income distribution losing £200.
Defending his decision not to end the freeze, Hammond told ITV’s Good Morning Britain: “We’ve had to take some measures in the past and those measures, some of them, are still working their way through the economy. But what we were able to do yesterday is set out a better future.”Defending his decision not to end the freeze, Hammond told ITV’s Good Morning Britain: “We’ve had to take some measures in the past and those measures, some of them, are still working their way through the economy. But what we were able to do yesterday is set out a better future.”
Analysis has shown that the chancellor chose to spend 75% of his total fiscal windfall of £73.8bn from the Office for Budget Responsibility over the forecast period, but Hammond said he had not “abandoned fiscal rectitude”.Analysis has shown that the chancellor chose to spend 75% of his total fiscal windfall of £73.8bn from the Office for Budget Responsibility over the forecast period, but Hammond said he had not “abandoned fiscal rectitude”.
“In every year of this forecast our deficit will get smaller,” he said, adding that there was still enough “fiscal headroom” to deal with economic shocks, such as a no-deal Brexit.“In every year of this forecast our deficit will get smaller,” he said, adding that there was still enough “fiscal headroom” to deal with economic shocks, such as a no-deal Brexit.
“If there is a shock, we will deal with it in the usual way,” he said. “Very often a shock to the economy can require a boost to spending in the short term, to support demand and keep the economy going. I have been very cautious in maintaining my fiscal headroom … so that if there was a shock to the economy, I have capacity to put further money into the economy.”“If there is a shock, we will deal with it in the usual way,” he said. “Very often a shock to the economy can require a boost to spending in the short term, to support demand and keep the economy going. I have been very cautious in maintaining my fiscal headroom … so that if there was a shock to the economy, I have capacity to put further money into the economy.”
Budget 2018Budget 2018
John McDonnellJohn McDonnell
Philip HammondPhilip Hammond
BudgetBudget
Income taxIncome tax
Tax and spendingTax and spending
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