Labour has warned Rishi Sunak that “now is not the time” for tax rises and urged him to abandon a “triple hammer blow” of council tax hikes, social security cuts and pay freezes in the upcoming Budget.
Shadow Chancellor Anneliese Dodds hinted at future support for tax hikes on corporations and online retailers – but said Mr Sunak needed to prioritise the economic recovery.
In a speech to Bloomberg in London, Ms Dodds accused her opposite number of being “economically illiterate” and attacked him for presiding over a “year of short-termism”, which she said had cost jobs and caused uncertainty for families and businesses.
Her comments came after the Chancellor hinted at possible tax rises in Wednesday’s Budget, warning that he needed to “level with people” about the challenges facing the economy.
Mr Sunak is reportedly considering hiking corporation tax from 19% to as much as 25%.
Labour has suggested it would oppose such a move – putting it into a surprising alliance with some Tory backbenchers.
Asked if Labour would back tax rises, Ms Dodds said: “We’ve been very clear that the Chancellor should be focused on promoting jobs, on ensuring that businesses can keep going, on getting people who are unemployed speedily back into work.
“He should not be focused on those tax rises.”
She said Labour would be “guided by the economic situation” on when taxes should be increased.
But she hinted that the party could support a levy on online retailers to help level the playing field for struggling high streets.
Ms Dodds added: “I’ve always been clear for example that we have tremendous anomalies unfortunately in the UK tax system.
“We particularly have a big gulf in how businesses based in bricks are taxed and how those based in clicks are taxed.
“We do need to face up to that in the future.
“But right now the Chancellor seems to be focused on those tax changes before he’s secured the tax base.”
Pressed on whether Labour would vote against corporation tax rises, she said Tory governments have pulled the UK further and further away from the average corporation tax level of other nations, which had failed to boost investment.
“So we would look with interest at any longer term plan that the Conservatives might set out to deal with that issue, especially if we also see action taken towards business rates,” she said.
“But should the Chancellor be focused on particularly imposing additional tax rises right now?
“Well, we don’t believe that he should be focused on that. He really should be focused on securing the recovery.
“Now is not the time for immediate tax rises – it is the time for a Chancellor focused on jobs and securing our recovery.”
Ms Dodds also accused the Chancellor of hammering families and rewarding frontline workers with a real-terms pay cut.
“Families across the country have sacrificed so much throughout this crisis, and yet Rishi Sunak ’s reward is to hit them with a triple hammer blow of council tax rises, social security cuts and pay freezes,” she said.
“The Chancellor’s message to our key workers – our teachers, our police officers, our armed forces personnel – at the end of one of the hardest years in living memory is to say you deserve a real-terms pay cut.
“That is spectacularly unjust. It’s also economically illiterate.
“If you take money out of people’s pockets, they’ll tighten their belts and spend less. Our high street shops and small businesses will have fewer customers.
“The economy will take longer to recover, more businesses will fail and more jobs will be lost.”
Ms Dodds said she would “not be adopting his position” if Labour was in Downing Street, and warned people were tightening their belts when the economy needed a boost.
The Chancellor confirmed a pay freeze for millions of public sector workers in November’s Spending Review.
Nurses, doctors and other NHS staff will get a pay rise, other public sector workers will miss out – unless their pay is under £24,000.
Meanwhile, Boris Johnson said he hoped there could be a “strong, jobs-led recovery” following the pandemic.
“Everybody has heard what Rishi has been saying about the importance of being frank with ourselves about the state of the public finances,” he told reporters on a visit to a school on Monday.
“Yes, of course, it’s been expensive to look after everybody throughout the pandemic.
“But I have no doubt that if we get it right, as I’m sure we can, we can have a strong, jobs-led recovery, that I think could be much stronger than many of the pessimists have been saying over the last six months or so.”