Labour’s shadow chancellor has been forced to defend his surprise support for Conservative plans to cut taxes for higher earners.
John McDonnell said on Tuesday he would not reverse moves to raise the 40p income tax threshold to wages over £50,000 from April 2019 if he was in government.
The policy, announced by chancellor Philip Hammond in his Budget on Monday, had been severely criticised by shadow foreign secretary Emily Thornberry, who dubbed it “tax cuts for the rich”.
However, speaking on the BBC on Tuesday morning, McDonnell raised eyebrows when he confirmed he would back the measure, saying: “We will support the tax cuts at the moment on the basis that it will inject some demand into the economy.”
That endorsement of one of the key tenants of the chancellor’s Budget surprised many senior Labour figures.
Greater Manchester Mayor Andy Burnham said he was “at a loss to understand why we are doing this”, while Home Affairs select committee chair Yvette Cooper stated bluntly: “This is wrong. I cannot support it.”
Senior backbencher David Lammy went even further with his criticism of the shadow chancellor, saying: “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.”
In a briefing with journalists, McDonnell refused to backdown in the face of mounting criticism, saying: “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.”
Labour’s tax plans would see a rate of 45p applied on earnings over £80,000 a year, while Conservative planned cuts to corporation tax would be reversed.
Responding directly to Burnham’s comments, the shadow chancellor 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.”
The Conservatives had originally planned to raise the higher rate of income tax threshold to £50,000 in 2020, but Hammond brought the policy forward by a year in his Budget.
He also announced the threshold at which earners will start paying tax will increase to £12,500 from April 2019 – another measure brought forward by a year.