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Labour says windfall tax rise could fund council tax freeze

Sir Keir Starmer - Daniel Leal/AFP
Sir Keir Starmer - Daniel Leal/AFP

Labour has claimed its plan to expand the windfall tax could fund a year-long freeze to council tax.

Sir Keir Starmer, the Labour leader, will on Thursday blame the Conservatives for the average local authority increasing its rates by an average of £99 from the start of next month.

He will argue that if Labour was in government it would raise the windfall tax rate to 78 per cent – the rate used by Norway – and backdate this to raise £10.4 billion across the next two years.

However, it is understood the party is currently refusing to commit to freezing council tax if it wins power and will wait until closer to the next election to set out exact plans.

Launching Labour’s local election campaign in Swindon, Sir Keir will say: “There is a choice on tax.

“A Tory choice – taxes up for working people, tax cuts for the one per cent – or a Labour choice, where we cut business rates to save our high streets and where, if there was a Labour government, you could take that council tax rise you just got and rip it up.

“A Labour government would freeze your council tax this year. That’s our choice, a tax cut for the many, not just for the top one per cent.”

Labour has regularly called for the windfall tax to be raised to cover the cost of extra public spending.

It demanded a “one-off” levy to help households with energy bill support last April, and four months later urged an £3.1 billion increase to the windfall tax introduced by Rishi Sunak.

Rachel Reeves, the shadow chancellor, argued for a tougher windfall tax in January, saying it would generate £13 billion to extend cost of living assistance.

But Greg Hands, the Conservative chairman, told The Telegraph that Labour’s announcement was “dead on arrival”.

“It’s not worth the paper it’s written on,” he said. “If Labour were serious about cutting council tax, Labour councils would be doing it now. Instead, across the country it’s Labour-run councils with higher council tax, and Labour-run London where council tax has gone up 9.7 per cent.”

Greg Smith, the Tory MP for Buckingham, dismissed the proposals as “classic Labour”, adding: “Local government finance needs attention in the current climate, but gimmicks like this are not a sustainable or even medium-term solution.”

Craig Mackinlay, another Conservative backbencher, said: “It is my view that windfall tax on energy companies has gone beyond a tipping point which will now drive away investment and much-needed energy security. Spending less never appears in Labour's dictionary.”

A Labour analysis published on Thursday suggested Labour-controlled councils charge £345 less than those with Conservative majorities. However, Conservative research found earlier this week that the Tory town halls facing election in May charge £80 less in council tax than their Labour counterparts.

Elsewhere in his speech, Sir Keir will double down on his commitment to close the non-dom tax loophole, which he claims could fund one of the largest ever NHS workforce expansions and breakfast clubs at all primary schools.

He will also promise to insulate 19 million homes to keep energy bills low “for good” and accuse Rishi Sunak and the Conservatives of setting Britain on a “path of decline” through “endless sticking plaster politics”.