Why Jeremy Corbyn's U.K. Labour Supports Tax Cuts for the Rich

(Bloomberg) -- When a British Conservative government announces tax cuts that disproportionately help those on higher salaries, you’d expect an opposition Labour Party led by socialist Jeremy Corbyn to object.

Analysis of Chancellor of the Exchequer Philip Hammond’s budget statement by the Resolution Foundation think tank found that the richest 10 percent of U.K. households would gain 410 pounds ($520) a year from the tax and welfare changes, whereas the poorest 10 percent would gain 30 pounds a year.

But Labour Treasury spokesman John McDonnell, who lists trying to overthrow capitalism as one of his pastimes, at first stayed strangely silent on the matter. Then when pressed, he said his party actually agreed with the tax cuts and wouldn’t attempt to reverse them.

“We’re not going to take money out of people’s pockets, simple as that,” he told reporters Tuesday. “Some of these are middle-earners, headteachers and people like that, who’ve had a rough time of it, as well as everyone else.”

His comments add to the signs both the U.K.’s main political parties are putting themselves on a pre-election footing. Hammond’s budget had giveaways clearly designed to appease voters tired of cuts to public services since the financial crisis, as well as a not-so-subtle attempt to calm Tory lawmakers angry at Prime Minister Theresa May’s Brexit strategy.

For McDonnell, supporting Hammond’s tax cuts removes an obvious attack line the Tories would undoubtedly have gone for in an election campaign. It also shows the degree to which he’s willing to drop cherished positions if it smooths his route to getting control of the Treasury.

Yet it’s still a surprising stance to take, especially for Labour lawmakers who have spent the best part of three decades on the receiving end of attacks from Corbyn and McDonnell for not being committed to high levels of taxation. Several of them spent the day relishing the new experience of attacking the pair from the left.

Andy Burnham, who lost out to Corbyn for the leadership in 2015 and is now mayor of Greater Manchester, tweeted: “At a loss to understand why we are doing this.” One Labour frontbencher said privately they thought McDonnell would have to change position.

So McDonnell and Corbyn find themselves in the place occupied by previous Labour leaderships -- trying to craft a voter-friendly economic policy while under attack from the very people they used to criticize for doing the same.

Whether they can hold their line will reveal how determined they are.

©2018 Bloomberg L.P.