Targeted tax rises should be doing more work in reducing the deficit, according to Shadow Chancellor Alan Johnson.
Giving his first major speech in his new role at the London offices of KPMG today, Johnson said growth is vital to the recovery and that spending cuts hit growth twice as hard as a tax increase.
He said: “My view is that specific, targeted tax changes need to do more of the work. We know from the Office for Budget Responsibility’s own figures that a spending cut hits growth twice as hard as a tax change – three times as hard when it is capital spending.”
He added: “We will work with the Government where it brings forward targeted tax rises that do not affect low and middle income families. If they follow our advice and stick to halving the deficit by 2013/14, such tax changes would allow greater protection for public services.”
Johnson cited a PricewaterhouseCoopers report which forecasts one million jobs will be lost due to the Government’s austerity measures.
He said: “A rising dole queue means a bigger welfare bill. And less tax coming in.”
He said Labour supports the rise in Capital Gains Tax, announced in the emergency Budget, but said the £2.4bn levy on banks was not enough. He said a bonus tax, proposed by former Chancellor Alistair Darling, alongside a bank levy would provide £7.5bn to the Government by the end of this Parliament.