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John McDonnell warns Labour risks losing next election if party opposes tax cuts for better off

John McDonnell pointed to defeat in 1992 and vowed: 'I am not going to make that mistake again' ( PA )

John McDonnell has defended his controversial backing for tax cuts for top earners, telling rebel Labour MPs they risk defeat in another Tory “tax bombshell” election campaign.

The shadow chancellor was rocked by a revolt by 20 Labour MPs in a Budget vote last week, angry that he was failing to fight a shake-up that “overwhelmingly benefit the rich”.

Mr McDonnell admitted the clash – over the hike in the threshold before the 40p income tax rate kicks in to £50,000 – had been politically painful for the leadership.

But he pointed to Labour’s shock defeat in the 1992 general election campaign, after a Conservative onslaught on the party’s tax plans, as the reason for the stance.

“In '92 I went round knocking on doors,” Mr McDonnell said. “If you remember the campaign the Tories waged with the big posters - Labour tax bombshell.

“I was knocking on doors of people who were unemployed, who were on low wages as well, saying to me 'I can't vote for you because you will increase my taxes'.

“And we hadn't won the argument about a fair taxation system. So, of course, I am not going to make that mistake again.”

The comments confirm that Mr McDonnell ducked a confrontation in last week’s vote to avoid antagonising the middle-class voters who switched to Labour at last year’s general election.

Three days earlier, the tax cuts had been attacked by Jeremy Corbyn – prompting suggestions of a clash between the leader and his key ally.

But, in the interview with BBC’s Newsnight programme, Mr McDonnell laughed off the claim of a split between a pragmatic strategist as shadow chancellor and a “dreamer” as leader.

“This idea that Jeremy is a dreamer is absolutely rubbish,” he said. “Jeremy has got a steel about him that people out there will see increasingly.

“We complement one another all the time. In some ways, we have different virtues and different strengths and different weaknesses. And we work with each other in that way.”

The Revolution Foundation think tank said the changes to thresholds would overwhelmingly benefit wealthier households, with almost half the £2.8bn giveaway going to the top 10 per cent of earners.

The revolt was led by Lisa Nandy, a respected former shadow minister, and backed by senior figures including Yvette Cooper, David Lammy and Alison McGovern.

But Mr McDonnell said: “When you see your opponent digging a hole in front of you, putting the spikes into that hole, covering them with leaves and inviting you to step into it, sometimes you want to walk round it.

At the 1992 general election, won against the odds by the Tories under John Major, Mr McDonnell failed to win his London seat of Hayes and Harlington seat by just 53 votes.

Under his tax plans, only the top 5 per cent of earners, on incomes over £80,000 a year, will pay more.

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