Vital infrastructure projects could be spared from the axe if ministers raised the banking levy, according to Alan Johnson, who said the tax could generate £7.5bn over the next four years.
The new shadow chancellor said the coalition government’s plans imply a 33% real cut in capital spending but cuts under plans he outlined would be “almost half that figure”.
He made the claim during a speech in London in which he accused the coalition of taking “a huge gamble with growth and jobs”.
The scale of the bank levy proposed by the government was inadequate and racheting it up would be a “balanced, fair, and most importantly pro-growth choice”, he said.
Mr Johnson said: “In terms of scale the £3.5bn bill from Alistair Darling’s bonus tax was absorbed with ease last year. In a time of rising profits they should be asked to maintain that scale of contribution alongside the existing levy proposal.
“The combination of these existing tax plans, and the call for banks to pay their fair share, could contribute £7.5bn by the end of the Parliament…The additional cash means that vital infrastructure projects could go ahead – keeping people in work now, and creating the environment for growth in the years to come.”
The former Labour home secretary also told BBC Radio 4’s The World at One that Labour now wanted a greater share of money to cut the deficit from tax rises rather than spending cuts - 60% from spending cuts and 40% from tax rises, compared with pre-election plans of 66% to 33%.
“This would make it around 60-40 but we’re being very very clear here - we’re not looking at people’s personal taxation,” he told the BBC.