Labour row erupts after John McDonnell backs Philip Hammond's tax cut for the rich

Posted On: 
30th October 2018

John McDonnell has come under fire after confirming that Labour will back a Conservative tax cut set to disproportionately benefit the richest households.

The Shadow Chancellor said the income tax cuts would 'inject some demand into the economy'.

The Shadow Chancellor said Labour would not scrap Philip Hammond’s Budget pledge to lift the threshold at which people start paying income tax to £12,500 and shift the higher rate to £50,000 a year earlier than planned.

The backing came in spite of a damning analysis by the Resolution Foundation think tank which said the move would benefit the richest tenth of households by 14 times as much as the poorest.

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While he repeated Labour’s call for a “fairer taxation system”, Mr McDonnell told Radio Four's Today programme: “We’ll support the tax cuts at the moment on the basis that it will inject some demand into the economy.”

He added: “What we’ve said is we’ll leave those personal allowances at whatever we inherit. But our focus will be on a fair taxation system.”

But the move was quickly questioned by former Labour Cabinet minister Andy Burnham - now the mayor of Greater Manchester - who said he was “at a loss to understand why we are doing this”.

Torsten Bell, the chief executive of the Resolution Foundation who worked as Labour’s director of policy under former leader Ed Miliband, said Mr McDonnell’s backing for the tax cut was “not a good idea”.

Backbencher Ian Austin also weighed in, pointing out that Mr McDonnell had not previously been supportive of Labour politicians forced to take “difficult decisions”.

Mr McDonnell’s backing for the income tax cuts came after his fellow Labour frontbenchers tore into the Conservatives over the move.

Shadow Foreign Secretary Emily Thornberry branded them “tax cuts for the rich”, while Shadow Education Secretary Angela Rayner shared an article highlighting the Resolution Foundation’s research.

Mr Hammond made the tax changes as he declared austerity was “finally coming to an end” - pumping much of a £78bn fiscal windfall into giveaways on the NHS, the military and roads, among other things.

But the Resolution Foundation said despite a cash injection into the Universal Credit welfare overhaul, it was the richest households in Britain who were the big winners of the autumn Budget.

In its report, the left-leaning think tank said almost 90% of the income tax cuts announced would go to the top half of the income distribution by the end of the current parliament - and almost half to the top 10% of households.