Reeves hints at tax cuts for top earners to recast Labour as party of middle classes
RACHEL REEVES is considering tax cuts for top earners as the shadow chancellor attempts to recast Labour as the party of economic growth.
Ms Reeves vowed to ensure “success is celebrated” under a Labour government as she outlined ambitions to ease the burden of Rishi Sunak’s multi-year stealth tax raid on workers.
Speaking to The Telegraph at the World Economic Forum in Davos, Switzerland, she said that lowering taxes on “working people” remained a priority, including those paying the highest 45p rate.
Ms Reeves said that freezing income tax thresholds in the face of rising inflation “has affected people paying the top rate of tax and the basic rate of tax, and both of those groups of people are working hard, but getting less every month in their pay packets.”
She added: “My instinct is to have lower taxes.”
The Prime Minister’s six-year freeze will push more than seven million people into higher income tax bands by the end of the decade as allowances fail to keep pace with salary rises.
Ms Reeves stressed that it would be “irresponsible” to commit to tax cuts without pinpointing how they would be funded as she vowed to stick to a plan to get debt falling.
However, asked if she agreed that she wanted lower taxes on workers “across the spectrum”, including those earning above £100,000, the shadow chancellor responded: “Yes”.
Her comments are the strongest signal yet that Labour wants to woo higher earners ahead of an expected general election this autumn.
They drew condemnation from trade union chiefs who accused Labour of pandering to the super-rich.
Sharon Graham, general secretary of
Unite, said: “It is becoming increasingly clear that state intervention and investment is needed if we are to achieve net zero, ensure our energy security and retain and grow industries vital to the national interest, such as steel. This is something governments in the European Union and US understand and are acting on. It is concerning that Rachel
Reeves seems to have been moving further away from this position at a Davos event which already epitomises the problem of vast wealth not being distributed fairly or used to invest in the real economy.
“If she does not do the right thing it will be working people and the country’s future success that pay the price for it. Labour needs to be bolder if it is to deliver economic growth that ensures a brighter future for everyone and not just those at the top.”
Jeremy Hunt, the Chancellor, was to arrive in Davos in the early hours of this morning to meet business leaders from firms including Pfizer, Microsoft and Moderna, as the UK economy teeters on the brink of recession.
He said: “I’ll be in Davos to tell the world that Britain, a nation of great innovation, is on the up and open for business.”
Top rate taxpayers now pay the 45p rate on all income above £125,140 after Mr Hunt reduced the threshold last year from £150,000. Reversing that would cost the Treasury about £1billion a year in 2025-26, according to the Institute for Fiscal Studies.
Treasury estimates show that increasing the basic rate limit by 10 per cent to £13,700 would cost about £10 billion a year.
Labour sources stressed that people paying the 20p and 40p rates would be prioritised if thresholds are increased, and that this will only be possible if the economy is growing and debt is falling. A source said: “Top rate taxpayers also benefit from cuts to the basic rate.”
A spokesman for the Treasury said: “The average earner will pay £1,000 less in tax this year than they otherwise would have done because of our cuts to National Insurance and above inflation increases to tax thresholds since 2010.”