Kate Andrews

Labour doubles down on opposition to tax hikes

Labour doubles down on opposition to tax hikes
Shadow chancellor Anneliese Dodds, picture: Getty
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Rishi Sunak kept his Budget cards close to his chest this morning as he toured the studios for both BBC One’s The Andrew Marr show and Sky News’ Ridge on Sunday. The Chancellor batted away questions about spending and possible tax hikes, repeating over and over again that it’s only ‘appropriate’ to wait until the fiscal event this Wednesday to reveal the details of his plans.

There were hints towards areas that have taken the Chancellor’s interest, including a passing comment about ‘business investment’ on Sky News – a bugbear of many on the right, who have long-argued that the UK’s corporate tax rate regime is ungenerous to businesses that would invest money into making their company more efficient. He told Sophy Ridge that her question from Andy in aviation, who had written to the show to ask about furlough extension, was an important one – with answers to come.

But from a specific policy perspective, we didn’t learn much more this morning than what has already been made public, including a £5 billion high street grant, which is set to give shops and pubs up to £18,000 each to support their reopening in the months to come. In this sense, it was a relatively easy gig for the Chancellor, who would have had a much more difficult time sitting in the hot seat next weekend, with all the details of his Budget out in the open to be scrutinised. But there were challenges still. Marr and Ridge weren’t just putting their questions about economic recovery to Sunak this morning, but to his opposite number in the Labour party as well. Anneliese Dodds’ forthright appearances drew clear contrast between her position on short-term economic policy and the Chancellor’s: differences that could make Sunak’s plans trickier to navigate politically in the months ahead.

Yes, there were plenty of elements of playing politics; Ridge’s questions to Dodds on corporation tax more or less confirmed that the Labour party would indeed support a rise in rates, just not right now. Apologising for sounding like a ‘stuck record’, Dodds was insistent on Sky that now was the time for the government to focus on ‘protecting jobs and businesses,’ but wouldn’t confirm at what point Labour would revert to support tax rises, especially ones linked to their 2019 manifesto.

But detach the words from the speakers and Dodds’ lines on tax and confidence will have resonated more with many backbenchers in the Conservative party than Sunak’s, telling Marr that the UK would be an ‘outlier’ amongst big economies if it were to raise taxes coming out of a pandemic, serving only to ‘clamp down in business confidence, on confidence in our recovery.’

In contrast, Sunak confirmed to Ridge that his vision as Chancellor was influenced by his low tax credentials – with caveats. ‘I’m a Conservative and I believe in low taxes,’ he told Ridge, and then paused: ‘look what’s happened to us over the past 12 months.’ The ‘sensitivity’ of the UK’s finances to another economic shock was a recurring theme, telling Marr that the state of public finances and the ability to deliver ‘strong public services’ was just as vital a part of his party’s promise to the electorate as other parts of their election manifesto.

It’s set to reason that the Chancellor would take the more cautious approach, and the shadow chancellor the more bullish approach. In contrast to many economists on the left and right, both Sunak and Dodds have been in the minority talking about interest rates, once again acknowledging this morning that the ability to carry on borrowing for practically nothing is by no means guaranteed. But if circumstances change, it is Sunak and the Tories, not Dodds, who will bear the political cost. Still, that may not be enough to convince everyone in his party that fiscal prudence is the right course to take. Or, if he decides to target corporation tax, that the extra revenue is worth undermining the success story that lower rates have turned out to be. Labour’s success in further clarifying and laying out their opposition to tax rises this morning makes the Chancellor’s hill to climb even steeper next week.