Labour’s deputy leader Lucy Powell risked infuriating the Prime Minister and Chancellor by warning that breaching the party’s manifesto by raising taxes would damage “trust in politics”.
Rachel Reeves is poised to increase income tax in her Budget this month, breaking Labour’s election campaign pledge not to raise levies on working people.
Powell said there was “no question” that the government should follow through on its election promises, and also urged the Chancellor to scrap the two-child benefit cap “in full” as a matter of urgency.
When she was elected deputy leader last month, the MP for Manchester Central – who was sacked from the Cabinet in September – made clear she would use her new position to challenge Keir Starmer in defence of Labour values.
But Labour MPs and ministers reacted with frustration at the intervention from a senior party figure at a time when the government is facing challenges on several fronts, including the freed prisoner scandal.
Her intervention comes days after Reeves gave an unusual televised pre-Budget speech in which she laid the ground for manifetso-busting income tax rises. While not saying whether she would raise income tax, she dropped the long-used phrase that the “broadest shoulders” must pay the most, to say that everyone will have to pay.
The Prime Minister has also dropped the line that Labour would stick to its manifesto commitments.
The Budget later this month is widely perceived to be era-defining as the Treasury seeks to fill a £20bn-30bn hole in the nation’s finances. Breaking the manifesto pledge is a huge risk – it would be the first income tax rise for 50 years – and the success or failure of the budget will set Labour’s reputation for a generation.
‘Lucy wrong to say this’
A Cabinet minister said: “Lucy is wrong to say this. Circumstances have changed as Rachel made clear on Tuesday.
“Rachel hasn’t spoken to us (cabinet) yet about the contents of the budget but we’re taking from the speech what everyone else is. That income tax is going up.”
A Labour backbencher said: “No one other than Treasury ministers should speculate pre-Budget as we have no insight into the way the sums add up.”
But a senior Labour MP appeared to back Powell by saying: “The top two reasons why people are leaving us is the cost of living and broken promises. So she [Reeves] needs to have a seriously coherent argument for raising income tax if she is going to go ahead and break the manifesto.”
And another Labour MP said: “On the tax stuff, every single time you think there must be some clever grand strategy here, and then you realize they’re just not, no, there isn’t. There isn’t anybody going: ‘guys: have we thought this through?’”
Speaking to Matt Chorley on BBC Radio 5 Live, Powell said: “We should be following through on our manifesto, of course. There’s no question about that.
“Trust in politics is a key part of that because if we’re to take the country with us then they’ve got to trust us and that’s really important too.”
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Powell also called for the two-child benefit cap to be lifted “in full” as a matter of urgency.
She said: “I think what we’ve all been talking about recently is the urgency of that now, because every year that passes with this policy in place, another 40,000 minimum, 40,000 children, are pushed into deep levels of poverty as a result of it and that’s why it is urgent that we do lift it and we lift it in full.”
While Powell used her deputy leadership campaign to call on the party to change course and return to Labour “values”, her intervention will be seen in the Treasury and Downing Street as unhelpful.
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