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John McDonnell vs. George Osborne on tax credits: a surprisingly calm and serious affair

27 October 2015

2:27 PM

27 October 2015

2:27 PM

George Osborne and John McDonnell went head-to-head at Treasury Questions today and one topic predictably dominated: tax credits. There was a charged atmosphere in the Commons as the shadow chancellor explained ‘the Chancellor has a choice before him’ and outlined his proposal for reversing the planned cuts to tax credits. The plan differs somewhat from Osborne’s:

‘He can push on with the tax giveaways to multinational corporations. He can press on with tax cuts to the wealthiest few in inheritance tax that he announced in his summer budgets. Or he can reverse those tax breaks for the few and instead go for a less excessive surplus target in 2019-20 and be in a position to avoid penalising the 3m working families with these tax credit cuts, and stick to his self-imposed charter.

‘Is he prepared to listen to reason on this matter? Is he willing, or is anyone on that side prepared to step up and show some leadership on this issue?’

McDonnell was heckled by the Tory benches ‘that’s rich!’ before Osborne responded, which can be summed up as ‘same old Labour party that can’t be trusted’:

‘Let’s remember, we inherited a tax system where city bankers were paying lower tax rates than the people who cleaned for them, and multinationals were paying no tax at all. We have introduced a new tax to make sure that multinationals do not divert their profits and we increased capital gains tax precisely to avoid that abuse of the tax rates. So we are not going to take lectures form the Labour party on a fair tax system.

‘And I would say this to him. He in a way reveals what he believes, which of course I completely respect, which is he says, “Abandon your surplus rule, run a deficit forever”. I profoundly disagree with that central judgment. I think if you borrow forever, if you are not prepared to make difficult decisions on welfare, you are going to condemn this country to decline. And that means that as a result people are going to become unemployed and living standards are going to fall. That is not the Britain I want to see. We are going to go on taking those difficult decisions to deliver that lower welfare, lower tax and higher wage economy. And this elected House of Commons is going to go on promoting the economic plan that delivers that.’

Aside from the point scoring, the big philosophical differences between McDonnell and Osborne were on show today. The pair fundamentally disagree on so much that finding any common ground is going to be hard. But Osborne did provide some satisfaction for the Labour benches as he explained how the ‘listening mode’ will result in some ‘transition’ help — likely to be announced in the Autumn Statement:

‘We will deliver the welfare savings that we were elected to deliver in this parliament. We will help people in the transition to that lower welfare, higher wage economy’.

There was no indication from Osborne about what the government is thinking about doing to punish the House of Lords — Isabel has some thoughts here  — although it was clear he is furious at the upper chamber. When asked by Patrick Grady, the SNP MP for Glasgow North, about how much money could save by abolishing the House of Lords, Osborne joked:

‘Now that is a very decent proposal for the Autumn Statement which we will give proper consideration to.’

Similarly to his last appearance at the Dispatch Box and his interview on the Marr show, the shadow chancellor came across as unflustered and serious, a very different approach from the ya booing of his predecessor. For one thing, it is harder for Osborne to sling insults across the floor when the other side is calmly engaging.


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