Labour leader Sir Keir Starmer has said he would reintroduce the 45 per cent top tax rate if he gets into government in Britain.
As his party’s annual conference started in Liverpool on Sunday, the opposition leader announced a vision to reverse the move by the Conservative-led government in a bid to woo voters.
Chancellor Kwasi Kwarteng on Friday announced reductions in the top 45 per cent rate of income tax, national insurance and stamp duty worth £45 billion ($48.81bn).
Under the plans drawn up by Prime Minister Liz Truss’s administration, the top 45p ($0.48) income tax rate on earnings of more than £150,000 a year will be scrapped, leaving the highest rate at 40p. The main income tax changes predominantly apply in England, Wales and Northern Ireland.
“I would reverse it — be absolutely clear about that,” Sir Keir told the BBC.
But the Labour leader said he will support the Conservative-led government’s reduction in the basic rate of income tax to 19p.
Mr Kwarteng’s mini-budget sent the pound tumbling to 37-year lows and sparked a backlash among some Tory MPs.
Using more than £70bn of increased borrowing, Mr Kwarteng on Friday unveiled the biggest programme of tax cuts for 50 years, including abolishing the top rate of income tax for the highest earners.
The wealthiest 5 per cent will see their incomes grow by 2 per cent next year (2023/24), while the other 95 per cent of the population will get poorer as the cost-of-living crisis continues.
The Institute of Fiscal Studies said only those with incomes of over £155,000 will be net beneficiaries of tax policies announced by the Conservatives over the current Parliament, with the “vast majority of income tax payers paying more tax”.
Labour accused the Tory government of gambling with people’s finances in “casino economics” and said their “trickle-down” approach will leave the next generation worse off.
Sir Keir said the tax-slashing package was driven by the “wrong headed” argument that “if you allow the rich to get richer somehow that money will trickle down into the pockets of all the rest of us”.
But Ms Truss defended her high-risk strategy designed to boost the UK’s economy, which is recovering from the Covid-19 pandemic.
In an article for The Mail on Sunday, she vowed to “usher in a decade of dynamism”.
“Growth means families have more money in their pockets, more people can work in highly paid jobs and more businesses can invest in their future," she wrote. "It provides more money to fund our public services, like schools, the NHS and the police.
“We will be unapologetic in this pursuit … everything we do will be tested against whether it helps our economy to grow or holds it back.”
The chancellor on Sunday defended his tax cuts, saying “there was no way that we were going to get more growth by simply increasing taxes and taking more of people’s money.”
“And that was the response that the prime minister and I debated,” he said in an interview with the BBC. “We talked about it and we thought 'we’ve got to change tack'.”
Questioned about the rising levels of inflation, he said: “I’m confident that the Bank [of England] is dealing with that, but also what perplexes me was the fact that you don’t deal with people’s rising cost of living by taking more of their money in tax.
“This was a totally perverse argument. No other G7 country is lifting up taxes while dealing with the cost of living. It doesn’t make any sense.”
Inflation hit a 40-year high of 10.1 per cent in July before dropping to 9.9 per cent the following month.