John McDonnell claims Rishi Sunak has ‘stolen’ his ‘rhetoric’ after Covid recovery Budget
Budget 2021: Ben Shephard challenges Rishi Sunak on GMB
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Mr Sunak has faced criticism over his first post-Brexit Budget amid warnings plans to address the UK’s battered public finances following the coronavirus crisis “do not look deliverable” without “considerable pain”. And Mr McDonnell, part of Jeremy Corbyn’s leadership team which steered Labour to a crushing defeat at the polls in December 2019, was also quick to condemn the Chancellor’s statement.
Sunak steals my rhetoric but no substance
He tweeted: “Sunak steals my rhetoric but no substance.
“Working people hit by income tax rise as thresholds frozen, council tax rise, pay freeze for public sector workers, cliff edge cut in Universal Credit in months, nothing for disabled on legacy benefits and over 2 million still excluded.”
And in a separate post he said: “‘Shifty’ Sunak promised to level with people but has been caught out trying to sneak through a stealth tax on the low paid, to hide billions of pounds of more cuts in public services and divert billions of taxpayers money into Tory areas.”
The Hayes MP’s comments came after Paul Johnson, director of the Institute for Fiscal Studies (IFS) think tank, said Mr Sunak’s plans left him looking more like Scrooge than Santa, with fiscal tightening of almost £50 billion relative to his pre-pandemic plans of March 2020.
Mr Johnson also said two big tax increases announced on yesterday were “screeching U-turns on Conservative policy over the last decade” with a rise in corporation tax of “historic proportions”.
Corporation tax will increase from 19 percent to 25 percent in 2023, raising £17.2 billion in 2025-26, although only firms with profits of £250,000 or more will pay the full rate.
There will also be a “super deduction” for companies when they invest, reducing their tax bill by 130 percent of the cost.
Mr Sunak said borrowing this year was £355 billion, 17 percent of national income – the highest level since the Second World War – while next year it is forecast to be £234 billion, 10.3 percent of gross domestic product (GDP).
The Budget measures will see borrowing fall to 4.5 percent of GDP in 2022-23, 3.5 percent in 2023-24, then 2.9 percent and 2.8 percent in the following two years.
But in a “tale of two budgets”, as Mr Johnson described it, the Chancellor said he would extend the furlough scheme and Universal Credit increase as part of a £65 billion lifeline for the economy.
However, income tax thresholds will be frozen, meaning more than a million extra people will be dragged into paying it as wages increase.
Inheritance tax thresholds, the pensions lifetime allowance, and the annual exempt amount in capital gains tax will also be maintained at current levels until April 2026.
Mr Sunak earlier defended the plans to freeze income tax thresholds, describing it as a “progressive” form of taxation.
He said: “Freezing personal tax thresholds is a progressive way to raise money.
“I think crucially what people need to understand is that no one’s take-home pay that they have today is affected or lowered by this policy.
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“What it does do is remove the incremental benefit that they might have experienced in future as inflation fed through to their wages.
“Also crucially, those on higher incomes are affected more by this policy – it is a very progressive policy and that is something that has been noted by independent think tanks that are respected, like the IFS and others who have made the point that the richest 20 percent of households, for example, will end up contributing I think 15 times more than those on the lowest incomes.
“That is why this is a fair way to help solve the problems that we need to.”
Torsten Bell, chief executive of the Resolution Foundation economic think tank, said the Budget marked a “very big change around” in the Tory approach to taxation.
He said Mr Sunak’s big rise in corporation tax raised “serious questions both on where investment is going to come from in the years ahead – remember, it’s not just this pandemic we are going through, it’s Brexit plus this at the same time”.
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