Income tax cuts: trick or treat? Labour MPs are divided

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“Mr Speaker, let’s put on the record: austerity is not ending. In the weeks and months ahead, people will recognise that the Prime Minister’s promise has been broken. There are rumours that this was possibly a pre-election budget with pre-election tax giveaways. If the Conservatives are contemplating a general election let me say, on behalf of the Labour Party, bring it on.”

That’s how John McDonnell concluded his budget response speech yesterday, when he listed those workers – from NHS staff to teachers and police officers – who would continue to see their pay fall and jobs made more difficult under Philip Hammond’s plans. This week, Labour’s message is clear: austerity is not ending.

Simply put, the Chancellor’s tax ‘giveaways’ – raising the income tax personal allowance and the 40% higher-rate threshold to £50,000 – benefit the richest. Why, then, isn’t Labour opposing the tax cuts? That’s the row that has come to a head after McDonnell confirmed the position, saying: “We’re not going to take money out of people’s pockets. Simple as that.” Alison McGovern, Yvette Cooper and Andy Burnham all criticised the decision, pointing to Resolution Foundation analysis that shows almost half the cuts would go to the top 10% of earners.

Labour MPs who are not considered Corbynites but not seen as consistently seeking to undermine the leadership either (let’s say currently ‘neutral but not hostile’) added to the critical voices. David Lammy called the Labour policy a “mistake” and Lisa Nandy has outlined her view on LabourList today: “If socialism is the language of priorities, as Nye Bevan put it, this choice is plain wrong and we should not support it… The cost of all this is £2.8bn – money that could be far better spent on the poorest families in Britain.”

Even Labour’s frontbench seemed somewhat unclear on whether to back the cuts or not. Emily Thornberry tweeted: “There we are – tax cuts for the rich”. Appearing on Sky News, Angela Rayner highlighted that “those at the top have had tax breaks”. And Jeremy Corbyn’s instant response to the autumn budget on Monday attacked the Tory government’s “ideological tax cuts”.

But Labour’s 2017 manifesto stated: “Only the top 5% of earners will be asked to contribute more in tax to help fund our public services.” McDonnell is vowing to protect what Ed Miliband used to call the ‘squeezed middle’, opposing the top 5% of earners rather than the top half or even top 10% that is being talked about by the Resolution Foundation. And, crucially, defenders of Labour’s position on these tax cuts point out that they would be paired with a corporation tax hike and a new top rate for those earning over £80,000 a year.

Tax cuts: trick or treat? Whichever side you’re on, it’ll be interesting to see whether the row comes up in PMQs today.

Sienna @siennamarla

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