Corbyn plan to tax rich unlikely to fulfil spending pledges, says IFS
LABOUR’S tax policy has been called into question after independent experts warned that John Mcdonnell would not be able to fulfil his spending plans just by targeting the rich.
The shadow chancellor pledged that under a Labour government 95 per cent of taxpayers would pay no additional tax, with just the “top five per cent” being charged a higher rate. “The day-to-day funding increase will be funded by taxing, yes, the top five per cent a higher rate of income tax,” he told an audience in London yesterday.
“Let me just make this clear, and cut through the lies and the fake news from the Tories over last couple of weeks. As I’ve said before, income tax rates, National Insurance and VAT will not increase for 95 per cent of earners.”
However, the Institute for Fiscal Studies (IFS) questioned how it was possible to raise “large sums” by targeting the better off. Stuart Adam, a senior research economist at the IFS, said: “If we are talking about raising more taxes in general, we’ll have to see where they want to get the revenue from, but it’s hard to raise really large sums just from the very well off.”
Mr Stuart pointed to other European countries where middle earnings were taxed more as a means of raising revenue and said it was “average earnings, rather than top earnings, that would be taxed markedly more if the UK adopted the tax system of a typical higher-tax country”. In its 2017 manifesto, Labour pledged not to raise income tax for those earning below £80,000 a year, and not to increase National Insurance contributions or VAT.
This would be achieved by lowering the threshold for the 45 per cent rate to £80,000 – from £150,000 – and introducing a new top 50 per cent rate on earnings above £123,000. The additional rate was 50 per cent for earnings above £150,000 from April 2010 until it was lowered to 45 per cent in 2012. ♦ Len Mccluskey, general secretary of the Unite union and one of Jeremy Corbyn’s key backers, was last night criticised by Labour activists for saying the party should curb freedom of movement to ease the fears of Leave voters, The Guardian reported.