Thursday, October 21, 2021

Raab and Starmer’s 50p top rate plan sparks row

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Image copyright Getty Images Image caption Britain’s former Brexit secretary Dominic Raab also thinks an 80% income tax rate should be on the table

Labour said on Sunday the 50p top tax rate, imposed under Margaret Thatcher, would be under serious consideration.

The party would also reintroduce the fuel duty escalator and would look at reversing the recent rate cut for higher earners.

Meanwhile, Tory MP Dominic Raab says a 75% top rate of income tax should be available to help fund welfare spending.

Both are in Mr Starmer’s proposed model for Labour in government.

The so-called “Raab idea” is based on the proposal from former work and pensions secretary Iain Duncan Smith to reinstate the 50p top rate of income tax and extend it to all earnings from the self-employed.

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Mr Raab said this could not be effectively paid for through tax increases but by dipping into the universal credit benefits budget which was already “impossible”.

Mr Starmer, MP for Holborn and St Pancras, who last month released the conclusions of Labour’s basic income study, also suggested that high earners should also be hit by the 75% top rate of income tax proposed by Mr Raab.

However, he was soon criticised by his party colleagues with shadow chancellor John McDonnell saying it was “reckless to change the principles of how the 50p rate has worked”, and shadow health secretary Jonathan Ashworth accusing the shadow work and pensions secretary of “playing tricks and games on the public”.

The talk of a 50p top rate of tax comes after the party plans to review the model used by the Conservatives when they were in power.

Having two rates of tax as “one tax” as Mr Starmer does was first advocated by the Tories when Tony Blair came to power.

“We were under enormous pressure to reduce the top rate of tax by keeping it at 40 per cent,” he told the Sunday Times newspaper, when asked what Labour would do on taxes.

“I think the original idea was absolutely right. I don’t think it was right at the time and I don’t think it’s right now,” he said.

Public opinion towards tax rises would also change if the revenue raised was handed over to charities, he argued.

Speaking on BBC One’s The Andrew Marr Show, Mr Starmer said the party would look at an increase in the minimum wage to £10 an hour and a further cut in fuel duty to 4p a litre, depending on how the economy and inflation were doing.

“We would keep the graduated rate system that we inherited from the Conservatives,” he said.

“The point is what does that do to the public finances.

“At the moment there’s an actual drag on growth in the economy. At a time of Brexit uncertainty, those economic and fiscal uncertainties are continuing.”

Unite general secretary Len McCluskey said he saw “no practical reason” why the rate should not be raised to 50p, but suggested it should be exempt from a vote on leaving the EU.

The shadow work and pensions secretary also repeated that Britain needed to rebuild its education system, warning that the latest generation is suffering from poorer results than their parents.

In response, Tory MP James Duddridge said Labour could be forgiven for being “out of touch” on the issue.

“Because you have Labour that isn’t worth our money,” he told The Sun.

“We are a major economy of the world, we can afford to educate our children properly.”

Shadow chancellor John McDonnell said Conservative austerity was to blame for the deteriorating education system, saying their benefit cuts had pushed 1.5 million people out of education.

The tax and spend plans are not yet detailed in a Labour manifesto but are expected to be included in its shadow chancellor’s budget next week.

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