Lisa Nandy: We’ve got this wrong. Labour should be opposing tax cuts for higher earners

31st October, 2018 8:38 am

Even by Tory standards, this year’s budget was breathtaking. After eight years of austerity, with 30% of children now growing up in poverty and homelessness up by 64% since the Tories took office, the Chancellor has announced tax cuts for the highest earners. His choices will gift earners like me an extra £860 a year and do almost nothing to help those who earn the least. If socialism is the language of priorities, as Nye Bevan put it, this choice is plain wrong and we should not support it.

It is a common Tory trick to give small amounts to some lower earners to distract from a policy that puts far more money into the pockets of the highest paid. Raising the personal allowance – the amount you can earn before you pay income tax – will help that small group of people who earn around £12,000 a little, but it will also benefit everyone who earns more than this, including the very wealthy. It is an astonishingly inefficient way of tackling poverty, and does nothing at all for the lowest earners who currently earn under £11,850 a year. This approach is morally wrong, disastrous for those families who earn the least and ruinous for the economy, where every pound that goes back into the pockets of the lowest paid is spent in local shops and businesses and boosts our struggling town economies whose high streets Philip Hammond pretends to prioritise. Big handouts to the best paid, put into savings accounts, does nothing of the sort.

High-income earners got another boost when the Chancellor brought forward the Tory pledge to increase the threshold for the 40% higher-rate tax to £50,000. As analysis by the Resolution Foundation has revealed, almost 90% of income tax cuts will go to the top half of earners and, in future years, nearly half the gains will go to the top 10% of earners. The cost of all this is £2.8bn – money that could be far better spent on the poorest families in Britain.

Already there are movements afoot to ask those who will gain from the budget to pool their tax cuts and give them to charity. This is an honourable response, but people should not be reduced to charity to simply exist in modern Britain. This was the con behind David Cameron’s ‘big society’: to take the dignity and security that should be demanded as a right and reduce it to a handout.

In recent years, the labour movement has rightly been much bolder about our opposition to these political choices, campaigning against austerity and highlighting its crushing impact on so many people who do not have a voice. Now is the time to roar. For all the misery caused by the decisions of the last eight years, half of the cuts George Osborne made to benefits in 2015 are still to coming into force. In April, working families will find their benefits are frozen, saving the Treasury £1.5bn. Surely the money spent on tax cuts for high earners would be better spent on them.

By 2020, the Institute for Fiscal Studies predicts 1.5 million more children will grow up in poverty as a result of these decisions, facing the hunger, anxiety and stigma that four million children across Britain already endure. The former Australian Prime Minister Ben Chifley once said Labour must be the “light on the hill for people in times of darkness”. These are the darkest of times, and we must be their voice.

Lisa Nandy is MP for Wigan and co-founder of Centre for Towns.

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