John McDonnell, the new shadow Chancellor, is under pressure to clarify Labour’s tax policies, with even the man credited with inventing “Corbynomics” describing the party’s tax plans as “weak”.
In an interview with The Independent on Sunday, tax expert Richard Murphy, whose ideas were the foundation of Mr Corbyn’s economic manifesto in the leadership campaign, said: “The tax area is actually relatively weak at the moment … He hasn’t talked about the reform of capital-gains taxation. He hasn’t talked about inheritance tax.”
Mr McDonnell, who masterminded Jeremy Corbyn’s unexpected leadership election victory, is set to make a speech at Labour’s annual conference in Brighton outlining his commitment to tackling the deficit.
In a newspaper interview this weekend, Mr McDonnell said Labour would vote in favour of Chancellor George Osborne’s fiscal charter on 14 October, a new mechanism that commits governments to running a budget surplus by 2019-20 and in all “normal” times thereafter.
However, Mr McDonnell’s position is nuanced, because he only believes there should be a surplus in current – day-to-day – spending and could still borrow for the capital budget to fund infrastructure projects. He says the opposition’s plans to balance the books would rely on growth rather than the Government’s sharp budget cuts.
The shadow Chancellor also said he would oppose tax rises on low and middle income earners, leaving Labour MPs and tax experts questioning when he will set out more policy detail on tax rises for businesses and the rich.
As well as the fiscal charter, key passages of the Finance Bill, which enacts Budget measures, are to be debated in a House of Commons committee when MPs return next month. The opposition will need to have details on its preferred tax levels ready for these hearings.
Chris Leslie, Mr McDonnell’s predecessor as shadow Chancellor, who refused to serve under Mr Corbyn, said: “Before 14 October, the new shadow Chancellor will obviously need the time and space to set out the financial detail of how [a current surplus] is achieved.”
At the general election Labour was committed to raising the top rate of income tax from 45 to 50 per cent, a position supported by Mr Corbyn. Some tax experts believe that Mr McDonnell would have to go higher, perhaps to the 60 per cent on earnings over £100,000 he suggested before Mr Corbyn’s victory, to reach a surplus.
George Bull, senior tax partner at accountancy firm Baker Tilly, said: “The money has got to come from somewhere – a fiscal balance has always got to come through taxes. If Labour isn’t going to hit anything else [other taxes] then they really have to go beyond 50 per cent [on the top rate].”
UK news in Pictures
UK news in Pictures
1/29 7 October 2015
National lottery winners raise their hats as they aim to set a new world record for the largest gathering of lottery millionaires, in London
2/29 7 October 2015
Campaigners against the Transatlantic Trade and Investment Partnership (TTIP) inflate a 'Trojan Horse' outside the European Commission at Smith Square in London. A Europe-wide petition demanding an end to TTIP has reached over 3,000,000 signatures with over 500,000 of signatories coming from the UK. TTIP is a controversial free trade deal between the European Union and the United States that promises multilateral economic growth. Critics of the trade agreement that it threatens EU food and environmental safety laws as well as the sovereignty of national governments which could be sued for damages by foreign investors wide ranging government actions that they can claim have threatened their profits
3/29 6 October 2015
A Cheviot Ram tries to exit the auction ring during the United Auction Great Annual Sale of North Country Cheviot Gimmers and Ewes at their sale in Lairg , Sutherland
4/29 6 October 2015
Delegates eat their lunches out of boxes on the steps of the Albert Memorial during the Institute of Directors convention at the Royal Albert Hall, London
5/29 5 October 2015
A flock of Exmoor Horn sheep are penned in Savile Row, London. The Campaign for Wool marked the beginning of Britain's national Wool Week, on one of London's most renowned streets
6/29 5 October 2015
A full-size origami inspired Lexus IS Saloon, the World's first origami car, is unveiled at Toyota's Headquarters in Surrey
7/29 4 October 2015
NHS workers take part in an anti-austerity protest during the first day of the Conservative Party Autumn Conference 2015 in Manchester. Up to 80,000 people are expected to attend a demonstration today organised by the TUC and anti-austerity protesters. Conservative Party members are in Manchester for its first conference as a party in a majority government since 1996
8/29 4 October 2015
A trade stand gives out fake notes depicting Labour Leader Jeremy Corbyn as a comment on the Labour Party's policies on Quantitive easing inside Manchester Central on day one of the Conservative Party Conference in Manchester
9/29 3 October 2015
A Red deer stag barks, with a female seen behind, in the morning sun in Richmond Park in west London
10/29 3 October 2015
Cider maker Roger Wilkins, owner of Wilkins Cider Farm picks apples from a tree in his orchard at his farm in the village of Mudgley in Somerset. The 67 year-old farmer, whose family has owned Lands End Farm in Mudgley since 1917, has been involved in traditional cider maker since he was a small boy. According to growers, this year's apple harvest is expected to a record-breaking bumper one, with one of the highest yield of English grown apples in more than 20 years, due in part to the early summer sun, followed by a wet and cool August
11/29 2 October 2015
People take part in the preview of the Japanese Journey experience at the London Restaurant Festival, which kicks off next week, with its exclusive culinary tour of 6 top Japanese restaurants serving a selection of mini dishes alongside Suntory Hibiki cocktails
London Restaurant Festival 2015/Suntory Whisky
12/29 2 October 2015
A rare self-portrait by the pioneering Indian modernist painter Amrita Sher-Gil: Untitled (Self-Portrait), 1931 is on display at Sotheby's auction house in London. The painting is to be sold on 7 October
13/29 1 October 2015
Thousands of farm fresh apples are being given away to Londoners by Farmdrop, the online marketplace that lets people buy food direct from local farmers and producers
14/29 1 October 2015
Judges walk from Westminster Abbey to the Houses of Parliament after a service to mark the start of the legal year, in central London
15/29 30 September 2015
A competitor ploughs a field using a vintage tractor as he takes part in the Mendip Ploughing Society's 146th annual competitions at Stanton Wick Farm near Pensford, near Bristol. Established in 1858 the Mendip Ploughing Society's annual ploughing match attracts ploughing entries in a variety of classes from the across the West Country using everything from steam engines, pairs of horses and tractors of all ages from vintage to the modern day. It also allows competitors to display their skills whilst celebrating years of agricultural tradition
16/29 30 September 2015
The first seal pup to be born this season at a major colony of grey seals on the Farne Islands is seen on Brownsman Island. The pups are sprayed with a harmless dye to help rangers keep a count. It washes off after three weeks. Up to 1,800 pups are expected to be raised on the Farne Islands off the Northumberland coast this year - up from the usual 1,500
17/29 29 September 2015
A giant model of a Polar Bear is moved from its position outside the Shell building after Actress Emma Thomson joined Greenpeace climate change activists in London. The event was marked as a celebration after the Anglo-Dutch oil company announced that it was pulling out of Arctic oil drilling
18/29 29 September 2015
Two red pandas, born in June at the ZSL Whipsnade Zoo, make their first public appearance
19/29 29 September 2015
Dawn breaks over the blast furnace at the SSI UK steel plant in Redcar. Following the announcement that SSI UK are mothballing the plant and ceasing steel production 1700 jobs at the Teesside site have been lost
20/29 28 September 2015
A veteran walks in the D-Day landing craft as it goes on show at the Naval Base in Portsmouth, Hampshire, prior to major refurbishment. The LCT 7074, the last Second World War Landing Craft (Tank) in the UK and one of the last in the world, is a campaign veteran of the D-Day landings. The craft was raised from Liverpool Docks last year by the National Museum of the Royal Navy and transported by sea to Portsmouth
21/29 28 September 2015
Prince Harry talks to students at an informal reception during his visit to The Duke of York's Royal Military School in Dover
22/29 27 September 2015
The supermoon rises behind Glastonbury Tor in Somerset, England
23/29 27 September 2015
Texel sheep are judged at the annual Masham Sheep Fair in Masham, northern England. The Sheep Fair, which is marking its 30th anniversary, was founded to commemorate the sheep market history of Masham market square where historically as many as 70,000 sheep were sold each year
24/29 27 September 2015
Pearly Kings, Queens, Princes and Princesses process towards the Church of St Mary-le-Bow, Cheapside where they attended the service for the 17th Pearly Kings and Queen's Harvest Festival in London. The tradition of the Pearly Kings and Queens dates back to 1875 and today 30 London families keep the tradition alive, raising money for charities across the city and attending London's events in their colourful handmade costumes
25/29 26 September 2015
Firefighters tackle a blaze at the Baitul Futuh Mosque in Morden, south west London. Around 70 firefighters are tackling the blaze which broke out around midday
26/29 26 September 2015
A South Africa fan walks outside the ground prior to the 2015 Rugby World Cup Pool B match between South Africa and Samoa at Villa Park in Birmingham
27/29 25 September 2015
A man receives a tattoo using traditional Samoan method at the London Tattoo Convention in Tobacco Dock in London. Over 300 tattoo artists from around the world are showcasing their body art in 26 halls at the convention which also features live music and tattoo competitions
28/29 25 September 2015
Croydon North UK Independence Party candidate Winston McKenzie attends the UK Independence Party annual conference at Doncaster Racecourse. After increasing their vote share following the May General Election campaign the UKIP conference this year focussed primarily on the campaign to leave the European Union ahead of the upcoming referendum on EU membership
29/29 24 September 2015
Hundreds of steel workers, their families and supporters attend a torch light vigil and rally to show support for the workers and contractors from SSI steel in Redcar. The event, which was organised by Labour MP for Redcar Anna Turley and members of the local community followed the recent announcement that SSI Steel has had to pause steel production at the Redcar site due to ongoing issues with the supply of raw materials and services
Mr Bull pointed out, though, that Mr McDonnell might believe he can raise tens of billions of pounds in lost tax. The Government has estimated that there is a £34bn gap between the tax HM Revenue & Customs collects and the amount that is lost through tax evasion, avoidance and disputes.
However, Mr Murphy has calculated this tax gap at £120bn. In his economic manifesto, published during the Labour leadership campaign, Mr Corbyn pledged to plough money into better resourcing HMRC so that officials could retrieve these missing billions.
Despite his excitement that Mr Corbyn had picked up on several of his ideas, Mr Murphy said: “They [Mr Corbyn’s team] borrowed some ideas that made sense to them. Are they the complete economic package? No.”
He described the Government’s plans to cut corporation tax to 18 per cent by 2020, when the UK already has the lowest in the G8 at 20 per cent, as “a complete and utter disaster”. He added this means Mr Osborne is “blatantly making Britain a tax haven”.
A second Labour MP said Mr McDonnell needs to “clarify, rapidly” his plans, complaining that he had provided “no detail at all” since his appointment two weeks ago.
In an interview with The IoS, shadow education secretary Lucy Powell said Labour had to rebuild trust on the economy to win in 2020. She said: “One of the principle [lessons from Labour’s general election defeat] for me is trust on the economy.
“That’s a really important thing to get right but I think also people want to be reminded of what our Labour values are and why we’ve got a different approach to what’s on offer from the Conservative Party. They would be two things I would take out of the last election that I think we’ve got to get right.”
A spokesman for Mr McDonnell could not be reached for comment.
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