The Shadow Chancellor and MP for Oxford East, Anneliese Dodds, has responded to the latest government Budget – delivered on Wednesday, March 3rd – calling it “a test of character for Rishi Sunak”, a test which she said he had “failed”.
In the recent Budget, Sunak announced an extension of the government’s furlough scheme, which will see the government continuing to pay 80% of the salary of affected employees until the end of September.
In addition, the Chancellor promised an increase of the minimum wage to £8.91 an hour, announced a freeze on alcohol and fuel duties for the next year, and offered tax breaks to incentivise business investment.
Much of Dodds’ criticism of the Budget focus not on its content, but on what was absent. The Shadow Chancellor criticised the budget for making “no mention” of key workers, social care, high streets, sick pay and inequality. In a statement on Labour’s website, Dodds said that “it’s incredible that the Chancellor couldn’t find a penny more for our schools and hospitals.”
Dodds also argued that despite the assurances by the Chancellor that “this government is not going to raise the rate of income tax, national insurance or VAT”, people “will be seeing a tax rise” of “up to 5%” due to increases in council tax. Prior to the Budget being announced, Labour had set out this opposition to tax rises as economically illiterate because they are seen to punish businesses at a time when many are already struggling to operate.
The Chancellor’s Budget also had to answer the question of how the government will fund its spending commitments while tax receipts remains lower than before the COVID-related restrictions.
To raise revenue, the Chancellor has said that he intends to freeze the tax-free allowance and the higher rate income tax threshold from April until 2026. He also intends to increase corporation tax on companies with profits of over £250,000 from 19% to 25% by 2023. This will be the first rise in corporation tax since 1974.
The latter move is a stark demonstration of the effects of the pandemic on economic thinking within government, with Jeremy Corbyn’s suggestion of raising corporation tax to 26% in Labour’s 2019 manifesto ridiculed by right-leaning newspapers like the Sun as part of a “class war” agenda.
The Conservatives had previously cut corporation tax from 28% in 2010 to its current levels of 19%. Sunak defended the move, saying it would not affect businesses until “well after the point when the OBR (Office for Budget Responsibility) expect the economy to have recovered”.
There remains, however, a large shortfall in public funding and this has prompted the Chancellor to say that government borrowing for the financial year 2021-22 “is forecast to be £234 billion”. Sunak told the House of Commons that borrowing for the next year was set to be “an amount so large it has only one rival in recent history; this year”, and that it will take “many decades” to pay back.
Anneliese Dodds MP has been contacted for comment.
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