Former Labour Party chair Ian Lavery has warned Keir Starmer to ditch “grotesque” plans to vote against corporation tax rises in the Budget.
Writing for HuffPost UK, Lavery said that it is “mind blowing” to even think that his party would oppose a hike in taxes on company profits.
Chancellor Rishi Sunak is widely expected to signal next week moves to increase the tax to help foot the bill of the Covid pandemic.
Treasury officials are considering putting up corporation tax from its current 19% rate to as high as 25% over the next few years, generating billions of pounds for the public coffers.
But even though a pledge to raise the tax was a centrepiece of Labour’s 2019 manifesto, Starmer has suggested his party would oppose any tax rises “right now” because of the fragility of the economy.
One senior Labour backbencher said that if Starmer imposed a three line whip on his MPs “there would be a sizeable rebellion”, and some shadow frontbenchers have expressed deep unease at the idea.
Lavery, a key figure under Jeremy Corbyn’s reign, said that party activists were already wondering when its new leadership would throw off its “timidity”.
“Many people are already questioning what Labour stands for, the much-trumpeted relaunch has not provided an answer,” he said, a reference to Starmer’s big speech on the economy last week when he called for a new partnership with business.
“If the rumours are correct and we end up with the grotesque sight of Labour whipped into voting alongside right wing Tory rebels, to defeat a meagre corporation tax rise that would only affect those who’ve done well out of the pandemic, then I fear for the future.”
Lavery added that his own “No Holding Back” group had recently proposed Labour should be going further than a corporation tax rise, and pushing a “Covid profiteering tax” and an “outsourcing tax” to tackle head on those who have exploited the crisis for financial gain.
“A Labour Party comfortable in its own skin would have no hesitation in backing the taxation of high level spivvery, to fund a better future. To think we are potentially lining up to vote down an even milder measure is mind blowing.
“The country depends on Labour to argue for and point the way to a better future. Quite simply this must be built on a partnership with society, paid for by taxation not a partnership with business, paid for by society.”
The backlash against Starmer came as Downing Street warned Conservative MPs they could be stripped of the Tory whip if they vote against the government at next week’s Budget.
Asked if the votes will be considered a confidence issue for Tory MPs, the prime minister’s press secretary, Allegra Stratton, said: “Yes.”
Several backbenchers have been highly critical of the plan to raise corporation taxes, particularly as former chancellor George Osborne steadily cut the rates and many Brexiteers hope for further cuts to help the UK attract investment.
Starmer has tried to pivot from the Corbyn era by opposing tax rises of all kinds, focusing on council taxes and business rates ahead of the local elections but also other levies during the pandemic.
Yet while think tanks like the Institute of Fiscal Studies have also said higher taxes would choke off any recovery, several Labour MPs including supporters of Starmer are pointing to the US where the Biden administration is looking at hiking corporation tax to raise cash.
Starmer raised the issue in prime minister’s question time this week, stressing: “Now is not the time for tax rises on families and businesses.”
Soon afterwards, shadow Treasury minister James Murray told BBC’s Daily Politics that his party would not back any tax rises. “We’re in the middle of an economic crisis, and this is not the time to do it,” he said.
Grassroots pro-Corbyn group Momentum pounced on the remarks. “During the pandemic big corporations like Amazon have cashed in while working people struggle to get by. Labour should support both raising corporation tax and a special Covid-19 windfall tax for sectors that have made super profits,” a spokesperson said.
A party source appeared to leave open the option for Labour to support corporation tax rises later in the parliament, while stressing that “right now” was the wrong time.
They told HuffPost UK: “The Chancellor is flying kites in the media on tax to see how they land, but Labour is clear that right now is not the time to be hitting families and struggling businesses with tax hikes.
“We’ll need to see what comes out of the Budget, but we already know the Chancellor is hitting families up and down the country with a triple hammer blow to their pockets of council tax rises, cuts to Universal Credit and pay freezes.
“The problem for businesses right now isn’t corporation tax, it’s business rates. That’s why the shadow chancellor is calling for the government to ensure its much-delayed review of business rates leads to wholesale reform so that high street shops compete on a level playing field with their online competitors.
“And that we end the gulf between how businesses based in bricks and mortar are taxed compared with those based largely on the internet”.