Labour came under sustained pressure from the Tories over its tax and spending plans on Wednesday, with a series of ministers claiming the party would raise inheritance tax and be unable to fund its campaign promises.
The opposition was accused by Boris Johnson of planning to halve the threshold at which tax on inheriting estates is levied, while Phillip Hammond and David Davis claimed that voters would face a £45bn tax and borrowing “bombshell” under Jeremy Corbyn.
Labour insisted on Wednesday evening that it was yet to finalise its manifesto policy for inheritance tax. However, the shadow chancellor, John McDonnell, earlier told the BBC that Labour would be reversing some of the Conservatives’ recent “tax giveaways”, which have included raising the threshold so that couples can pass on homes worth up to £850,000 to their children tax-free.
Corbyn’s party is conscious of his popularity with younger voters, who struggle to afford to get on the property ladder, and has repeatedly stressed the unfairness of Britain’s tax system.
The Tories immediately seized on the suggestion that Labour could be considering reducing the threshold to £425,000 a couple, with Johnson, a former London mayor, tweeting: “Corbyn wants Inheritance Tax raid on HALF of London! Don’t risk Labour coalition of chaos propped up by Lib Dems and SNP.”
Labour sources said the policy was yet to be fully worked out, but inheritance tax could be one source of the extra revenue the party will need to fund its pre-election pledges. A Labour spokesman said: “We will be setting out our plans in our manifesto.”
Earlier in the day, Hammond and Davis launched a deliberately provocative poster, warning that voters face a £45bn tax and borrowing “bombshell” under Corbyn.
Although Labour’s manifesto has not yet been finalised, the chancellor and Brexit secretary presented a 17-page dossier on what they say are spending promises made by Corbyn or another shadow cabinet minister.
The promises highlighted include restoring nurses’ bursaries, abolishing university tuition fees and boosting infrastructure spending. The two ministers were speaking in Westminster against the backdrop of a deliberately provocative new campaign poster, featuring a larger-than-lifesize photograph of Corbyn and a giant bomb.
It said: “No bombs for the army, but one big bombshell for your family,” in a deliberate echo of the party’s “tax bombshell” 1992 election poster, which was credited at the time with helping the Tories to win a tight election.
Hammond urged voters not to jeopardise the hard work of the past seven years by handing power to Labour, saying: “We are still dealing with the consequences of Labour’s recession.
“All the progress we’ve made over the last seven years could easily be lost, if we make a wrong turn now. The only reliable way to get debt falling and to keep our country on track to a better future is to continue as we have done, reducing the deficit, so that we live within our means.
“Jeremy Corbyn has made clear that he takes a different view. He says that we should not be afraid of debt, or borrowing. That is exactly the attitude that got us into such extreme economic difficulty in the first place.”
McDonnell has sought to ensure that all Labour’s pledges are fully funded, including by reversing plans to cut corporation tax and capital gains tax. But the shadow home secretary, Diane Abbott’s stumbling performance on LBC radio on Tuesday, as she sought to explain how the pledge to hire 10,000 new police officers would be paid for, played into the Conservatives’ narrative that Labour cannot be trusted to manage the public purse.
“The prime minister has made it clear that she will make no commitments on spending or taxation that she cannot deliver,” Hammond said. “That is the yardstick of responsibility on which all political parties should be judged – and by that yardstick, Jeremy Corbyn has failed.”
Davis said the £45bn black hole was a result of adding up the costs implied in every statement made by Corbyn and his team that voters would reasonably conclude amounted to a policy pledge. He accused Labour of “pledging populist policies for everyone and ducking difficult decisions”, and the cumulative effect of statements by shadow ministers in recent months was “a huge scorecard of spending commitments”.
But Labour’s campaigns chief, Andrew Gwynne, said: “Their claims are so flimsy that even the most cursory reading reveals error after error: claims that don’t add up, things they say are Labour policy which aren’t and blatant misrepresentation of policies which we have clearly set out how to pay for. The whole thing isn’t worth the paper it’s written on.”
Hammond refused to be drawn on his own tax plans, amid speculation that the Conservative manifesto will not repeat the sweeping pledges of the 2015 general election not to raise income tax, national insurance or VAT. Instead, he simply repeated his insistence that the Conservatives are a “low-tax party”.
Theresa May ruled out raising VAT at the weekend, after she was pressed on the issue, but Hammond has said he needs the “flexibility” to respond to the state of the economy.
He was forced to tear up his March budget, amid an outcry over plans to increase national insurance contributions for the self-employed, which appeared to break the 2015 manifesto pledge.