The “radical and responsible” manifesto launched by leader Jeremy Corbyn in Bradford focused on taxing the wealthiest in society to pay for the NHS, education and improving worker’s rights.
The headline policies were leaked last week, ahead of the election on 8 June, but today Labour revealed its costings, with a large increase in corporation tax and a crackdown on tax avoidance paying for a large chunk.
“As the days turn into weeks, opinion is changing and moving towards Labour,” said Corbyn.
“There is no secret as to the reason to that. People want a country run for the benefit of the many, not the few.
“For the last seven years our people have lived through the opposite: a Britain for the elite, rich and vested interests,” he added.
The Labour leader said the policy agenda will "change our country while managing within our means".
The key economic proposals from the manifesto included:
- Income tax rate 45p on £80,000 and above; 50p to be reintroduced above £123,000 earnings
- No raise of National insurance or VAT
- £6.4bn to be raised from income tax from the top 5%
- Extra £19.4bn from higher corporation tax
- Corporation tax raised from 19% to 26% by 2020
- An excessive-pay levy - 2.5% on earnings over £330,000 and 5% on over £500,000.
- Increasing the Living Wage to £10 by 2020
- Refusing to leave the EU with no trade deal in place
- A ban on zero-hour contracts
- Scrapping university tuition fees
- Renationalising the railways, the water industry and Royal Mail
- Scrapping quarterly tax reporting for small businesses
Corbyn added that the Conservative Brexit plans would turn Britain into a "low wage tax haven".
Reaction to the manifesto from the business community:
Stephen Ibbotson, ICAEW director of business, thought there were some good ideas but had questions over costs and delivery.
“A National Investment Bank backed by the state for example could help stimulate funding and boost investment in infrastructure. In theory this would help stimulate growth and raise productivity, but whether Labour can deliver on this is a big ask.
“Whilst some measures such as commitments to exempt the smallest businesses from burdensome quarterly tax reporting and reforms to business rates are positive, there is not much overall to help businesses, especially SMEs,” said Ibbotson.
On the planned increase in corporation tax, Helen Miller, an associate director at the Institute for Fiscal Studies (IFS), said, “A rate of 26% would, just, leave the UK with the lowest headline corporation tax rate in the G7. But we would move down the competitiveness ranking relative to some other EU countries.
“A higher rate would also reduce the incentive for both domestic and multinational companies to invest in the UK, which might cause concern as we prepare to leave the European Union. It is also likely that the initial revenue raised would reduce over time as companies invest less and change behaviour in other ways.”
On the policy to further crack down on tax havens, ActionAid head of advocacy Charlie Matthews, said, “Stronger anti-tax haven rules could help to tackle corporate tax avoidance in the UK and around the world, including in some of the world’s poorest countries.
“Tax havens and profit shifting by big companies have a corrosive impact on the global tax system, with developing countries often the worst affected. Women and girls are shut out of education and healthcare when key public services can’t get the funding they need.
Federation of Small Businesses (FSB) national chairman Mike Cherry praised Labour for committing not to raise their National Insurance contributions for self-employed and for scrapping quarterly reporting. However he called on Corbyn to honour his pledge to not raise corporation tax for SMEs.
Accountancy firm Kingston Smith points out that Labour’s tax plans could hurt the better off.
“A quirk of the current tax system is that earnings between £100,000 and £123,000 have an effective tax rate of 60 per cent,” says Tim Stovold, head of tax at Kingston Smith.
“Labour’s suggestion of a 45% tax rate on earnings between £80,000 and £123,000 would mean the UK would hit a new record high tax rate of 67.5% on earnings between £100,000 and £123,000.
"Add to this employee’s National Insurance at 2% and the rate is nearly 70%. This would start to really impact households with a single high earner and who are already spending all their earnings on meeting day-to-day costs.”