Labour plots a tax bombshell on the middle class

20 Apr

Labour is plotting a tax bombshell that would hit 1.6million people were it to pull off a stunning election shock.

Shadow chancellor John McDonnell has suggested he wants to soak the ‘rich’ earning more than £70,000 a year under a Jeremy Corbyn government.

His claim prompted speculation Labour could slash the point at which the 45p top rate of income tax kicks in from £150,000 to £70,000. 

The Labour leadership has publicly discussed nine other tax rises and a raft of spending priorities which run to £500billion. 

Labour leader Jeremy Corbyn, pictured on the campaign trail last night, has been accused of plotting a tax bombshell for the middle class 

Labour leader Jeremy Corbyn, pictured on the campaign trail last night, has been accused of plotting a tax bombshell for the middle class 

Labour leader Jeremy Corbyn, pictured on the campaign trail last night, has been accused of plotting a tax bombshell for the middle class 

Shadow chancellor John McDonnell has suggested he wants to soak the 'rich' earning more than £70,000 a year  

Shadow chancellor John McDonnell has suggested he wants to soak the 'rich' earning more than £70,000 a year  

Shadow chancellor John McDonnell has suggested he wants to soak the ‘rich’ earning more than £70,000 a year  

A Labour spokesman refused to rule out a new £70,000 tax band, saying: ‘We will be laying out our policies on taxation in detail in our manifesto in the coming weeks. Labour believes in a fair tax system, and is opposed to the £70billion in Tory tax giveaways to the super-rich and big corporations.’

When Mr McDonnell was asked yesterday if his comments would mean people earning more than £70,000 paying more income tax, he said: ‘That’s not what we’ve said.’ 

In a signal of the chaotic Labour campaign, shadow foreign secretary Emily Thornberry today insisted the party had not yet set out its manifesto tax plans. 

TAX BOMBSHELL: LABOUR’S PUBLIC PLANS

1. A rise in the basic rate of income tax – in September 2015 Mr Corbyn said: ‘If we want dignity in old age, then it has to be paid for.’

2. A seven per cent rise in NI if earning £50k+ – In July 2015 Mr Corbyn said it could fund the end of tuition fees.

3. Rise in corporation tax – In November 2016 Mr Corbyn said Labour would raise corporation tax.

4. A tax on the family home – In December 2016 Jon Ashworth said: ‘Mansion tax is something Labour should continue.’

5. A new land value tax – In April 2017 Mr Corbyn said he was ‘interested’.

6. Inheritance tax increase – In April 2016 John McDonnell said that ‘what I don’t want to see happening is the cut in inheritance tax’.

7. A 20 per cent tax on wealthy people’s savings – In March 2012 Mr McDonnell said: ‘If you took 20 per cent you would then have £800bn to tackle our deficit.’

8. Raising capital gains tax – In March 2016 Mr Corbyn said: ‘I suggest they don’t go ahead with those tax cuts at the top end of the scale.’

9. Top rate of tax at 60 per cent – In May 2012 Mr McDonnell said: it could be ‘on incomes above £100,000’ 

Chancellor Philip Hammond said: ‘Jeremy Corbyn’s right hand man has shown us the serious choice at this election the weak and unstable leadership of Jeremy Corbyn, propped up by the Lib Dems and the Scottish Nationalists, would wreck the economy and weaken our hand in the Brexit negotiations.’

Adam Marshall, the director general of the British Chambers of Commerce, told the Telegraph: ‘Business and entrepreneurs are very sensitive to rates of personal income tax. They affect their assessment of risk and for going out and building a business, so bringing down the threshold for higher rates is anti-entrepreneurial.

‘We need to build a great business environment in the UK if we want business to power us ahead. In addition, very often high rates of tax end up bringing less into the exchequer rather than more.’

Previous attempts to increase higher rate tax have shown that high earners either find ways to avoid paying, or take a lower salary and top up their pay by other means, leading to a lower tax yield. 

Mark Giddens, a partner at accountants UHY Hacker Young, said: ‘These proposals will hit many taxpayers who already see themselves as the ‘squeezed middle’, who already feel the pinch from taxes and the cost of housing.

‘The argument made, by some, is that high taxes for higher earners reduces the incentives for those top earners and entrepreneurs to work harder and create more wealth and jobs.’ 

Mr McDonnell triggered alarm at Labour’s tax plans on yesterday’s BBC Radio 4 Today programme when he said he thought those earning ‘roughly’ £70,000 or £80,000 were ‘rich’.

Theresa May has warned a Jeremy Corbyn government would be a 'coalition of chaos' 

Theresa May has warned a Jeremy Corbyn government would be a 'coalition of chaos' 

Theresa May has warned a Jeremy Corbyn government would be a ‘coalition of chaos’ 

Chancellor Philip Hammond, pictured in Downing Street with US Speaker Paul Ryan yesterday, said Labour's plans showed the clear choice at the election 

Chancellor Philip Hammond, pictured in Downing Street with US Speaker Paul Ryan yesterday, said Labour's plans showed the clear choice at the election 

Chancellor Philip Hammond, pictured in Downing Street with US Speaker Paul Ryan yesterday, said Labour’s plans showed the clear choice at the election 

‘What we’ve said is we want a fair system of taxation to pay for our public services. In the coming weeks we will be publishing our proposals about how we establish that within our manifesto,’ he said.

‘We want to get a system that is fair, so the corporations and the rich pay their way more and that means ending the tax giveaways to the corporations and also those in inheritance tax, capital gains tax and the bankers’ levy – all of those giveaways under this Government.’

Mr McDonnell added: ‘The rich will be above £70,000 to £80,000 a year and that’s roughly defined as what people feel is an earning whereby people feel they can pay more.’

Labour will also go into the election promising to cap pay on senior executives, Mr McDonnell said, with no bosses able to pay themselves above a certain multiple of lower-paid employees.

Mr Corbyn notoriously proposed a fixed cap on how much people could earn – before bactracking amid a wave of ridicule. 

The party's ratings under Jeremy Corbyn (pictured leaving his London home today) have been woeful - with the most recent showing it is 21 points behind the Conservatives

The party's ratings under Jeremy Corbyn (pictured leaving his London home today) have been woeful - with the most recent showing it is 21 points behind the Conservatives

The party’s ratings under Jeremy Corbyn (pictured leaving his London home today) have been woeful – with the most recent showing it is 21 points behind the Conservatives

‘It will be a pay ratio. That in itself will set a cap in terms of what the maximum earning will be within that company in relation to an average worker’s pay because we believe in fairness within our economy.’

Mr McDonnell claimed that Theresa May’s decision to call an early election was more about the risk of an economic downturn rather than securing a mandate for her plans on leaving the European Union.

‘I don’t think this election is about Brexit,’ he said. ‘The Government has seen that the economy at the moment is going to turn.

‘We are seeing inflation increasing, we are seeing wages stagnate and we are seeing people in heavy debt as a result of that.’

Labour’s approach to Brexit talks would aim to secure ‘tariff-free access to the single market’ and a managed and fair immigration system from the EU.

On future customs arrangements, Mr McDonnell said: ‘We want to maximise the benefits that we currently get from the customs union – that does not necessarily mean full membership of the customs union.’ 

 

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