John McDonnell Backs Tory Budget Tax Cuts Despite Opposition From Labour MPs

Analysis says changes 'overwhelmingly benefit the rich'.

John McDonnell has defended his decision to support the government’s planned tax cuts for the rich - despite opposition from prominent Labour figures.

Yvette Cooper, Andy Burnham, David Lammy and Lisa Nandy have all demanded the shadow chancellor oppose Philip Hammond’s Budget measures.

The Resolution Foundation think-tank said this morning the tax cutting measures taken by the chancellor would “overwhelmingly benefit the rich”.

And the Institute for Fiscal Studies added the personal tax and benefit reforms introduced by the Conservatives since 2015 have “hit the poorest the hardest”.

But McDonnell said while he did “completely understand” criticism from within his party he did not want to “take money out of people’s pockets”.

“We’re not going to take funding away from people. Some of these are middle earners, we’re talking about head teachers and people like that who have had a rough time as well as everyone else,” he told journalists on Tuesday afternoon.

He had earlier told the BBC: “We will support the tax cuts at the moment on the basis that it will inject some demand into the economy.”

In his Budget on Monday, Hammond brought forward by a year a Tory manifesto pledge to raise to £50,000 the threshold at which people pay the higher tax rate of 40%.

He also increased in the personal allowance - the amount on which people pay no tax at all - from £11,850 to £12,500.

Budget documents show that “a higher rate taxpayer will have an average real gain of £387” – nearly six times a much as someone on low wages.

Momentum, the Jeremy Corbyn supporting grassroots campaign group, this morning also attacked Hammond’s tax cuts in a tweet linked to a Guardian report on the Budget.

Hammond said the changes to the income tax thresholds were “right and moral” as it had been promised in the 2017 Tory manifesto.

“You have an obligation to deliver on that promise,” he said.

The Resolution Foundation said today overall the Budget measures announced since 2015 will deliver an average gain of £390 for the richest fifth of households in 2023-24, compared to an average loss of £400 for the poorest fifth of households.

It said the richest tenth of households are set to gain 14 times as much in cash terms next year from the income tax and benefits giveaways in this Budget compared to the poorest tenth of households (£410 vs £30).

Torsten Bell, the think tank’s director who was Labour director of policy under Ed Miliband, said “income tax cuts announced yesterday will overwhelmingly benefit richer households, with almost half of the long term gains going to the top ten per cent of households”.