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30 October 2018

Why John McDonnell is sticking to his guns on tax cuts for the rich

The strategic decision the Shadow Chancellor has made is that definition of “the few” should be heavily circumscribed, and as “the many” should be as big as possible.

By Patrick Maguire

It has been a pretty surreal day for anyone who remembers the 2015 Labour leadership election. John McDonnell has said that Labour will not oppose the income tax cuts for high earners announced by Philip Hammond yesterday, and as a result is being attacked from the left by – among others – Yvette Cooper and Andy Burnham.

The Shadow Chancellor rather surprisingly announced his support for the increase in the personal allowance (to £12,500) and higher-rate tax threshold (to £50,000) on the Today programme this morning, despite its £2.8bn cost to the Treasury (the benefits freeze, by comparison, saves £1.5bn), and Jeremy Corbyn’s criticism of tax cuts for the wealthy as “ideological” yesterday. 

McDonnell has stuck manfully to that line in a series of interviews since, despite opposition from Momentum, within the PLP and a particularly powerful intervention from Burnham. “I can’t see how tax cuts for the wealthiest can be the top priority when our police are so stretched and there are people dying on British streets for want of a roof over their head,” the mayor of Greater Manchester wrote today in the Times

So why is McDonnell sticking to his guns? The first thing to remember is that this is not a new decision, but was in fact included in Labour’s 2017 manifesto. Accordingly, it is best understood in terms of the many vs the few. 

Addressing the press gallery in Westminster this afternoon, the Shadow Chancellor sought to spin Labour’s support for the cuts as a gesture of support for the squeezed middle: “We’re not going to take funding away from people, some of these are middle earners – we’re talking about headteachers and people like that who’ve had a rough time.” Though he said he “completely understood” Burnham’s criticism, McDonnell does not agree with its fundamental assumption that those who will benefit from the cut, like the headteachers he frequently talks about, are “the wealthiest”.

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That’s why, though he acknowledged that he was backing a tax cut for some millionaires, McDonnell gave no sign of preparing for a u-turn. It’s also why he was keen to qualify his support with reference to his own plans, which would see corporation tax increased and the top five per cent of earners pay more in income tax. Contextualising it like that means the story is of Labour increasing taxes on the rich – just, a different rich.

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The strategic decision the Labour leadership has made – evident in decisions like this – is that definition “the few” should be heavily circumscribed, and that space within which people can reasonably identify as “the many” should be as capacious as possible. It remains to be seen whether MPs will swallow it.