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Corbyn fumbles on tax questions as Labour policy faces criticism

Labour leader Jeremy Corbyn
Labour leader Jeremy Corbyn speaks at the Bernie Grant Arts Centre in London on 26 November. Photo: Henry Nicholls/Reuters

Labour leader Jeremy Corbyn was forced to admit in an interview on Tuesday night that some low-income taxpayers could end up paying more tax under the party’s manifesto proposals.

In an interview with Andrew Neil on BBC1, Corbyn was asked if his scrapping of the marriage allowance and higher taxes on dividend would lead to higher taxes for those earning under £80,000 a year, which Corbyn has repeatedly claimed would not happen under a Labour government.

The Labour leader was asked: “You’re going to have higher dividend taxes, and that’ll hit people on modest incomes too, not just the rich. Take somebody on a state pension. Maybe they’ve also got an annuity of about £4,000. A small private pension. And they’ve saved and they’ve got dividend income of about £2,000. At the moment they pay £9 in income tax, that’s it. Under you they’ll pay over £400 in income tax. We’re talking about people who are just on £14,000 a year.”

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Corbyn disputed the working, saying: “They’ll be taxed on the basis of their total income. It’s a graded tax, so that would be ... reasonable and fair to do. I would question that figure actually. But what I would also say is that the whole purpose behind our manifesto, which I have here, is to recognise that we have to do something about the underfunding of our public services and the poverty and inequality that austerity has brought to this country.”

Corbyn also faced questions regarding the elasticity of his tax base.

Neil argued that given that 0.1% of the population make up 12% of his tax base, a Corbyn government could face the issue of capital flight in regard to tax revenue.

Corbyn responded that the increase in taxation would be marginal enough that it would not lead to flight, saying: “I think they would also recognise that tax rates, in general, have gone down. That the levels of inequality have gone up. The levels of personal wealth for them have gone up enormously over the past 10 years, and they can see all around them the crumbling of public services and the terrible levels of child poverty that exist across Britain.”

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When pushed on the financial impact of this policy, Corbyn claimed the scrapping of the marriage allowance would be economically offset by other policies, saying: “[Married couples] will also be getting a pay rise when we bring in a living wage ... they will also be getting improvement in free nursery provision for two- to four-year-olds ... they’ll also get properly funded schools.”

Corbyn underlined the fairness of his proposals and said: “People that are cohabiting in a very happy family atmosphere and bringing up children do not get the benefit of that ... it seems to me this is a step towards equality.”

Labour has said that £83bn of tax rises, to offset increases in spending, will be raised from companies and the top 5% of earners. The party manifesto also mentions raising the rate on capital gains tax and dividends, and scrapping marriage allowance.