Keir Starmer will resist pressure from within his own party to reverse Liz Truss’s 1p cut for basic rate taxpayers because of fears it could deal a fatal blow to Labour’s chances of victory at the coming election.
The Labour leader dramatically pledged to reinstate the 45p income tax rate for Britain’s wealthiest people, abolished by chancellor Kwasi Kwarteng in his mini-budget on Friday in what Sir Keir described as a “wrong-headed” Tory policy to “allow the rich to get richer”.
But he was facing demands to go further by restoring the 20 per cent basic rate of the levy, due to be reduced to 19 per cent in April after Mr Kwarteng brought a planned cut forward by a year.
Greater Manchester mayor Andy Burnham publicly challenged Sir Keir’s support for the cut, stating that it was not “the most targeted way of using the resources that we’ve got at this moment in time”.
But a senior ally of the Labour leader told The Independent there was no question of Sir Keir backing down over the issue.
“We can’t go into the election telling ordinary workers ‘we’re going to put your taxes up’ and expect to win,” said the MP at Labour’s annual conference in Liverpool.
Mr Burnham was accused by Starmer loyalists of going on leadership manoeuvres after he told a fringe meeting: “We need to get a bit more on the front foot and say we’re going to fight back – in parliament and around the country.”
But the Manchester mayor – who came just a point behind Sir Keir in an Independent poll as preferred leader among Labour supporters – insisted: “He’s got my support. I’m here to help.”
As ministers braced for further carnage on the markets when they reopen on Monday, Mr Kwarteng brushed off criticism of his £45bn tax giveaway, which prompted a plunge in the value of the pound and a sharp fall in share prices.
Rejecting claims his package represented a massive “gamble” with the economy, he doubled down on the policy, declaring: “There’s more to come.”
The abolition of the 45p “additional rate” of income tax will be worth an average of £10,000 to 630,000 people earning £150,000 a year or more at a cost of £2bn to the Treasury, while the £5bn change to the basic rate is worth an average of just £170 to millions of lower-paid workers.
But Sir Keir made clear he backed the 1p cut, telling the BBC’s Laura Kuenssberg: “I’ve long made the argument that we should reduce the tax burden on working people.”
By contrast, he broke with his long-standing refusal to spell out tax plans in advance of the election with a firm pledge to restore the 45p rate.
“I do not think that the choice to have tax cuts for those that are earning hundreds of thousands of pounds is the right choice when our economy is struggling the way it is, working people are struggling in the way they are,” said the Labour leader. “That is the wrong choice.”
The Starmer ally said that Ms Truss’s decision to hand a tax break to the rich and to lift the cap on bankers’ bonuses had gifted Labour a “massive dividing line” to exploit in its efforts to woo back voters who had abandoned the party over the past four elections.
“When we heard about bankers’ bonuses, we were saying ‘Are you joking? Why would you do that?’”
At the crucial annual conference in Liverpool, Sir Keir was facing pressure to step up support for strikers demanding pay rises to match soaring inflation of 10 per cent or more.
Deputy leader Angela Rayner delivered a full-throated message of backing for unions, telling the conference she would defend the right to strike “so long as I have a breath in my body” and promising Labour will repeal all anti-union laws enacted by the Tories.
And shadow cabinet minister Ed Miliband backed bumper pay deals, telling Times Radio they “should be keeping up with inflation”. Shadow transport minister Tan Dhesi told a meeting on the fringe of the conference that Labour would take rail back into public ownership.
