IFS say Labour tax proposals could raise up to £4.5 billion – or nothing at all

The Labour manifesto published today promises to raise some £48.6 billion in new revenue to pay for spending commitments including higher funding for schools and the abolition of tuition fees, but not many people in South Yorkshire will be affected.

Among the specific proposals is a 45% income tax rate for earnings above £80,000, and a higher rate of 50% for incomes above £123,000.

“We ask only that those at the top pay their fair share,” said shadow chancellor John McDonnell.

Even the top 10% of South Yorkshire earners earn only about £42,000 per year on average, according to the latest provisional figures from the Office for National Statistics.

According to the Institute for Fiscal Studies (IFS), the 2% of adults affected by Labour’s plans already pay 40% of all income tax.

There has already been uncertainty about how much Labour expects to raise from the income tax changes.

Labour’s Jon Ashworth, seeking re-election in Leicester South, told the Today programme that they would raise “something in the region of £4.5 billion”.

But an appendix to the Labour manifesto said the changes would bring in an extra £6.4 billion.

Robert Joyce, an associate director at the IFS, said the amount of extra revenue was “very uncertain”.

“Labour’s policy could raise something like the £4.5 billion it expects, but it could also raise nothing,” said he said.

If there were no change in incomes, the new tax rates would bring in about £7 billion, according to a study by Mr Joyce and colleagues.

But high-income people could work less, contribute more to pension funds, emigrate or find other ways to avoid tax, they said.