Labour is the first major party to reveal its general election 2017 manifesto, featuring a range of new tax and business measures.
Key ‘For The Many Not The Few’ announcements include:
Extra tax take in total £48.6bn
Income tax rate 45p on £80,000 and above
50p to be reintroduced above £123,000 earnings
£6.4bn to be raised from income tax from the top 5%
A new excessive pay levy
Extra £19.4bn from higher corporation tax
£6.5bn from tax avoidance programme
According to the final manifesto (a draft was leaked last week) a Labour government would impose £48.6bn of annual tax rises on the wealthy and on business to fund an equal spike in public sector spending. The party has insisted that the income tax rise will hit just 5% of earners. Shadow chancellor John McDonnell said the policy proved Labour was “the party of low taxes for middle and low earners”.
The largest tax rise in the proposals is an increase in corporation tax to 26%, raising £19.4bn a year.
Up to 1.5m high earners would also be hit with an increase in income tax raising £6bn a year. The proposal involves lowering the threshold for the 45p additional rate to £80,000 and reintroducing the 50p rate on earnings above £123,000.
A new excessive pay levy would see a 2.5% charge on earnings above £330,000 and 5% on more than £500,000.
The party also plans to extend stamp duty reserve tax to derivatives, will carry out a review of corporate tax reliefs, reverse tax giveaways on capital gains tax, inheritance tax and the bank levy, plus impose VAT on private school fees. Labour says it would also raise £4.7bn a year through a financial transaction tax.
Party leader Jeremy Corbyn has committed to carrying out a range of re-nationalisations, including Royal Mail, taking control of the railways as existing franchises come up for tender, the water and sewerage system, and intervening in the energy markets.
Fair tax campaigner Richard Murphy said Labour was making a move in the right direction in its policy to tackle high pay, but said it will need to go further: “My obvious question is to ask why the timidity? Quite a number of years ago I wrote a policy for the TUC on this issue, which was adopted, which suggested that any payroll cost above 10 times UK median pay (now just over £28,000 a year) should be disallowed for corporation tax creating an effective 19% levy on that excess at current rates. I still think that worthwhile and fair.”
Robert Joyce, an associate director at the Institute for Fiscal Studies (IFS) also commented on the policy: “Labour is proposing to raise income taxes for the highest-income 2% of adults. Many would take action to reduce their taxable income in response: for example by increasing contributions to private pensions. Because the extent of those kinds of responses is very uncertain, the amount of extra revenue these higher tax rates would raise is also very uncertain.
“Labour’s policy could raise something like the £4.5bn per year it expects, but it could also raise nothing. What is certain is that the proposal would miss an opportunity to sort out the complex mess that recent governments have made of the tax system for those with the highest incomes,” Joyce said.
What do you make of the Labour Party manifesto?
About Robert Lovell
Business and finance journalist