John McDonnell outlines plans to borrow extra £58bn for Waspi women pledge
Shadow chancellor John McDonnell has defended the Labour party’s plans to borrow the vast majority of the £58bn of pension compensation it has promised 1950s-born women.
Challenged over how Labour would pay for the expensive election pledge on BBC’s Andrew Marr show, McDonnell said: “We will borrow, and I don’t shy away from that, because this is historic injustice.”
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Just days after releasing its manifesto, Labour announced the pledge to compensate the Women Against State Pension Inequality (Waspi) women who argue they were hit by a rise in the state pension age. The party said most of the money would come through extra borrowing.
The Institute for Fiscal Studies (IFS) think tank said the promise “drives a coach and horses” through the party’s manifesto costings, which it had already deemed “not credible”.
Today, McDonnell claimed the pledge was not in the party’s costing document because it would not be day-to-day spending. He said Labour outlined borrowing for things such as its green transformation fund “in a separate exercise”.
“The bulk of this will be borrowed,” the shadow chancellor admitted. “We’ve got to be honest about that. But it’s the right thing to do and I will not shift on this.”
McDonnell was grilled on how he would borrow the “vast amount of money” without interest rates going up.
Labour’s manifesto plans already promised to borrow £400bn over 10 years for a “national transformation fund” to invest in infrastructure and tackling climate change, before the pensions pledge.
He said the money “will be relatively cheap to borrow” because “interest rates are still very, very low”. He added: “Over a five-year period, it’ll be borrowed in the normal way.”
The IFS has questioned the decision to spend the sum – which is far more than the annual defence budget – on a group who are on average relatively well off.
The think tank highlighted that it was far more than the party was offering “the much bigger group of much poorer working age benefit recipients”.
McDonnell also defended Labour’s plans to hike corporation tax back to roughly its 2010 level, claiming that the rise would not be passed on to customers through higher prices, as critics have argued.
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The IFS has said that it is likely to be passed on at least in part and could be clawed back through lower wages.
Yet McDonnell said “there is little evidence to show that” increased taxes “are passed on in increased prices”. He also suggested that Labour’s policy of having workers on boards could help hold down prices.