McDonnell joined by academics in letter backing windfall tax on excess profits

John McDonnell has been joined by Labour Party supporters and academics in signing a letter that proposes the introduction of a windfall tax on excess profits as a way of preventing Covid-accelerated destitution.

The statement, signed by the former Shadow Chancellor, as well as figures including former Labour policy director Andrew Fisher, economist Ann Pettifor and Labour peer Prem Sikka, comes ahead of the Spring Budget 2021.

It describes a “real risk of rising destitution, evictions and repossessions” due to the ongoing pandemic and refers to the personal debt crisis that has been exacerbated by coronavirus with many forced into arrears.

But there are companies that have “made bumper profits” during Covid, the letter points out, adding: “A windfall tax on those who have enjoyed excess profits would be the fairest way to prevent destitution and homelessness.”

A windfall tax on privatised utilities was introduced by Tony Blair’s Labour government in 1997 to fund the New Deal programme aimed at tackling long-term unemployment, as well as providing capital investment.

While restaurants, pubs and cinemas have been hard-hit by Covid restrictions that have come in and out over the past year, other companies – such as supermarkets and online retailers – have benefited from the changes.

The statement signatories have said they would like to see the UK government impose a windfall tax on the firms that have thrived during the pandemic, with the revenue used “to bail out those who face real hardship”.

Survation polling conducted from February 23rd to 25th asked UK adults whether they would support or oppose the introduction of a windfall tax on the pandemic profits of large companies such as Amazon.

44% replied that they would strongly support the move and a further 27% said they would somewhat support it, translating to 70% support overall. Only a combined total of 9% reported that they opposed the idea.

The level of support was higher among those who voted Conservative (75%) or Liberal Democrat (75%) at the 2019 general election, compared to Labour voters (72%), and only slightly higher among Remainers than Leavers.

Rishi Sunak is not expected to use the Budget on Wednesday to announce a windfall tax, but the Chancellor is reportedly considering an increase in capital gains tax, paid on shares and company assets.

He could also raise corporation tax, beginning to reverse George Osborne’s cuts – a move opposed by Labour in the short term – and freeze personal income tax allowances, which Labour would not necessarily oppose.

Below is the full text of the letter and signatories.

The pandemic has caused thousands of people to lose work or lose income, and there is now a real risk of rising destitution, evictions and repossessions.

Families have been forced into debt through no fault of their own, and the government now has a duty to act to ensure that people keep a roof over their heads.

While many people are struggling with their finances, some companies have made bumper profits in the pandemic. A windfall tax on those who have enjoyed excess profits would be the fairest way to prevent destitution and homelessness.

Whether it’s the banks, corporate landlords or crony contractors, a levy on excess profits would demonstrate that we truly are all in this together.

Windfall taxes have been levied by both Conservative and Labour chancellors in the past and we hope all politicians will back a windfall tax on those who have done well in the crisis to bail out those who face real hardship.

John McDonnell MP, former Shadow Chancellor
Grace Blakeley, author, The Corona Crash 
John Christensen, Tax Justice Network
Professor Danny Dorling, University of Oxford
Andrew Fisher, Claim the Future 
Professor Daniela Gabor, University of the West of England 
Joe Guinan, The Democracy Collaborative 
Paul Mason, journalist and film-maker 
Dr Johnna Montgomerie, King’s College, London
Robert Palmer, Tax Justice UK 
Ann Pettifor, Prime Economics
Howard Reed, Landman Economics 
Pascale Robinson, We Own It!
Dr Faiza Shaheen, inequality lead, Pathfinders, New York University 
Nicholas Shaxson, author, The Finance Curse
Lord Prem Sikka, Professor of Accounting, University of Essex 
Richard Wilkinson, The Equality Trust
Madeleine Williams, director, Claim the Future