Rachel Reeves, Labour’s shadow chancellor, has pledged to restore the top income tax bracket and spend the proceeds to boost the number of doctors and nurses in the NHS as the main party of UK opposition was seeking to put clear blue water between itself and the ruling Tories.
She told delegates to Labour’s annual conference in Liverpool that Friday’s decision by Chancellor Kwasi Kwarteng to remove the 45% rate was the wrong priority during a cost of living crisis, describing it as “a tax cut for the top 1%.
The shadow chancellor said a Labor government would use the £2billion raised through the top-slice retax, which applies to earnings over £150,000, to tackle the acute workforce crisis in the NHS.
The money would fund the training of more than 5,000 new health visitors, create another 10,000 nursing and midwifery placements each year and double the number of medical students.
She accused new Prime Minister Liz Truss of abandoning the previous Tory government’s ‘race to the top’ scheme, designed to rebalance the economy away from London and the South East. Instead, Truss was pursuing a “trickle down economy” in which taxes are changed to help the wealthy generate broader economic growth. “This idea has been tried and tested and failed,” she said.
Reeves said as Chancellor she would maintain a tight grip on Britain’s public finances, unlike Kwarteng who last week announced more borrowing than in any budget since 1972 at a time when inflation was already high and interest rates rising.
The so-called mini-budget rattled markets as investors sent the pound plunges and the gildings reach highs. “The message from the financial markets was clear on Friday, and this morning that message is even clearer: the pound is down. This means higher prices as import costs rise,” she said.
“The cost of government borrowing is rising. . . and in turn, this means that the cost of borrowing for workers will also increase, with higher mortgage repayments for families.
Reeves said a Labor government would ensure all its policies were ‘carefully costed and fully funded’ as she accused the Tories of breaking their own budget rules 10 times in the 12 years they have been in power .
The Shadow Chancellor lambasted the Tories for ‘piling over £50bn of national debt every year, due to their reckless decision to put all the costs on borrowing’.
Reeves said a Labor government would also reverse Kwarteng’s £17billion-a-year corporation tax cut, but retain the Chancellor’s two other big cuts: a £13billion cut from the insurance and the basic rate of income tax from 1p next April to 19p, worth £5billion.
Labor leader Sir Keir Starmer decided at the weekend to keep the new basic tax bracket of 19%, realizing that a pledge to restore it to 20% would be seized by political opponents as an attack on the lowest income workers.
One of the biggest differences in economic policy between the government and the opposition today is rather the extent of the measures aimed at the energy crisis.
The government said on Friday its energy price cap program would cost £60billion for just six months. The bailout – made up of £31bn for households and £29bn for businesses – will largely be funded by huge borrowing.
Labour’s energy bailout would have cost just £29billion over the same period because it would have been targeted only at households. The party said it would have been funded by extending the existing energy windfall tax, scrapping the government’s £400 universal payment this autumn and cutting state debt repayments as intervention would have reduced inflation.
Labor is said to have only introduced a £1billion support package for businesses aimed at energy-intensive industries and offered a further £1billion reduction in commercial tariffs for small businesses – paid for by a £2 billion increase in the Digital Services Tax.