Labour backlash after McDonnell refuses to oppose budget tax cuts

The shadow chancellor, John McDonnell, has sparked a backlash from Labour MPs by insisting that the party would not to oppose the tax cuts for higher earners announced in Monday’s budget.

“We’re not going to take money out of people’s pockets. Simple as that,” McDonnell said, despite pressure from some colleagues to oppose the giveaway, which was one of the most eyecatching measures in Philip Hammond’s pre-Brexit budget.

Hammond brought forward a Conservative manifesto pledge to increase the personal allowance to £12,500, and the higher-rate tax threshold to £50,000, by a year.

Analysis by the Resolution Foundation published on Tuesday found that the cuts, which will cost the Treasury almost £2.8bn, would overwhelmingly benefit wealthier households, with almost half the giveaway going to the top 10% of earners.

McDonnell surprised many on his own benches by saying that if Labour took power it would not reverse the measure, instead preferring to impose its own tax increases that would target corporations and the top 5%.

Alison McGovern, the chair of the centre-left Progress group, which is associated with Labour, said: “We can’t support spending more on tax cuts for quite wealthy people than on dealing with the universal credit mess.”

The Tottenham MP David Lammy said: “These tax cuts leave a bitter taste in my mouth because they help high earners in the City far more than my constituents in Tottenham, some of whom this winter will be facing the choice between eating and heating. I believe it is a mistake for the Labour party to support this policy as it will lead to more inequality, not less.”

The home affairs select committee chair, Yvette Cooper, said: “This is wrong. I cannot support it.”

McDonnell, however, was unrepentant. “We’re not going to take funding away from people. Some of these are middle-earners, headteachers and people like that, who’ve had a rough time of it, as well as everyone else,” he said.

Instead of reversing Hammond’s giveaways, McDonnell said Labour would implement its own tax rises, including a new top rate of 45p for those earning over £80,000 a year, and reversing Conservative cuts to corporation tax.

“We want a fair taxation system, where the top 5% pay a bit more,” he said. In response to criticism from the Manchester mayor, Andy Burnham, who said the tax cuts would be “hard to justify at any time,” McDonnell said: “I completely understand where Andy’s coming from, but what we’re into is trying to ensure we have a fair taxation system based upon the new proposals on income tax that we’ve put forward, which he supported.”

Under the income tax cuts announced by Hammond, the 20% tax band, which currently starts on earnings above £11,850, will rise to £12,500 next year, and the higher rate 40% tax band will begin at £50,000 from April, up from £46,350.

Opposition parties rarely set out detailed tax and spend policies so early in a parliament, but with Theresa May uncertain about whether she will be able to secure parliament’s support for her Brexit deal, few at Westminster are ruling out the prospect of a general election in the next 12 months.

McDonnell’s pragmatic approach raised eyebrows among Labour veterans, who remember him and his colleagues in the leftwing Campaign Group of backbenchers during Labour’s years in power criticising Gordon Brown’s budgets for not being radical enough.

In his speech to parliament during the debate on the budget, McDonell told MPs that Hammond’s speech on Monday showed the Tories were “ideologically crushed” and “so bereft of ideas that they make a pathetic attempt to imitate some of Labour policies”.

Earlier, Hammond had defended his tax cuts, pointing out that they were outlined in the Conservatives’ general election manifesto last year – though he has implemented them more quickly than promised.

“People have a right to expect that when politicians go before them in a general election and make a very clear commitment, they deliver on that commitment,” he said.