Tory tax rises “flying in the face of international evidence”, says Dodds

Anneliese Dodds has argued that government moves to increase taxes during the Covid pandemic would be “flying in the face of that international evidence” as she urged Rishi Sunak to “secure the economy first”.

In a speech to Bloomberg this morning, the Shadow Chancellor accused her opposite number of mismanaging the economy over the past year and described the Budget later this week as a “critical moment in the crisis”.

She defended Labour’s position on corporation tax. Labour leader Keir Starmer and members of his shadow cabinet have insisted that now is not the time to raise corporation tax following reports Sunak could increase it from 19% to 25%.

Asked for her thoughts on when it would be appropriate to increase taxation, the Shadow Chancellor made the case that Sunak “should be focused on promoting jobs, on ensuring that businesses should be able to keep going”.

Of the Chancellor, she said: “He should not be focused on those tax rises. And actually, in the case of council tax, of course we’re seeing that rise taking place right now – up to 5% on families. That’s the wrong decision.”

“It is flying in the face of that international evidence,” she added. Dodds had stressed in her speech that “every major international economic organisation”, including the IMF, the OECD and the World Bank, had warned against tax rises.

“Now, in terms of when there should be a focus on tax changes – obviously we need to be guided by the economic situation,” the Shadow Chancellor told those watching the online event this morning.

“I’ve always been clear that, for example, we have tremendous anomalies unfortunately in the UK tax system. We particularly have a big gulf between how businesses based in bricks are taxed and how those based on clicks are taxed.

“We do need to face up to that for the future. But right now, the Chancellor seems to be focused on those tax changes before he’s secured the tax base. While we’re losing jobs, we’re seeing businesses going to the wall, there’s less economic activity to be taxed in the first place.”

She added: “All those discussions around taxation, when we’re facing effectively a shrinking tax base compared to where it should be, are in effect second-order questions. Important ones, yes, but let’s secure the economy first.”

Her comments come after Starmer argued during Prime Minister’s Questions last month that “now is not the time for tax rises on families and businesses”. Critics have since pointed out his previous pledge to reverse Tory cuts to corporation tax.

Shadow Foreign Secretary Lisa Nandy said last week that “there will be a time for raising taxes, doing it fairly and paying down the debt – but that time is not now”, indicating that the party would support increases in the longer term.

Dodds said in an interview on Sunday that Labour would “look carefully” at a “long-term plan for getting our country to a better place on corporation tax” in the Budget but warned against immediate tax increases.

The party leadership has faced some criticism over its position. Former party chair Ian Lavery MP warned the Labour leader to abandon the “grotesque” plan to vote against an increase to corporation tax this week.

Dodds also told viewers today that she is “not going to make an apologies for Labour’s focus having been serving as as constructive opposition” throughout the pandemic and said she was focused on getting the country to a “better situation”.

“It has been necessary to serve as that constructive opposition and to focus on that task,” she said. “That may mean that politics has been operating slightly differently over the last few months but I think that’s what the public has wanted.”

Dodds used her speech this morning to demand that the Chancellor transform his “stuttering and slow” employment programme and bring forward £30bn of planned investment to support the creation of up to 400,000 new, green jobs.

She called on Sunak to reverse the “triple-hammer blow” to families across the country with his planned cut to Universal Credit, council tax rises forced on local authorities and the introduction of the public sector pay freeze.

The Shadow Chancellor argued that Covid has exposed “the weaknesses of ten years of Conservative mismanagement of our economy” and said the coronavirus crisis must be a “wake-up call” for Sunak to put the country on a different path.

She also stressed what she called the “Sunak effect” on the economy. She highlighted that in three months up to November, when the Chancellor was insisting on winding down the furlough scheme, redundancies hit a record high of 40,000.

Dodds reiterated her call for a ‘smart’ extension to the furlough scheme, expansion of the £500 test and trace payment, a six-month extension of business rates relief and clarity on the future of the self-employed income support scheme.