Manifesto to be published on Tuesday will include charging firms 2.5% levy on earnings above £330,000 and 5% on those above £500,000

Jeremy Corbyn will lay out plans for a “fat cat” tax under which big businesses, city banks and Premier League clubs will have to pay a levy if they offer workers hefty pay packages, the Guardian has learned.



The full Labour manifesto, to be published on Tuesday, will include a proposal that aims to disincentivise excessive pay by charging companies a 2.5% levy on earnings above £330,000 and 5% on those above £500,000.

Labour will justify the move – that will hit employers rather than workers and be calculated on the basis of basic salary, shares, bonuses and pensions rolled together – by claiming inequality is damaging society. Those who designed the policy believe it will deter companies from paying excessive amounts.

The rates mean that companies will have to pay £4,250 extra for every worker receiving £500,000 in pay and perks. For a person earning £1m a year, that would rise to £29,250.

The policy will be accompanied by Corbyn unveiling a plan to raise £4.5bn by increasing income tax for those earning more than £80,000 – almost one million people – with experts suggesting a 45% rate, which is currently imposed on salaries above £150,000.

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The Guardian understands that there is also likely to be a new 50% tax rate, which will kick in at a lower income threshold than the current £150,000 top rate. Those proposals, which were not included in last week’s leaked draft manifesto, will be published in a separate document.

Money for a series of giveaways will come from reversing corporation tax and inheritance tax cuts and a proposal to hit City transactions with a “Robin Hood tax”.

The moves deepen the bidding war between Corbyn’s party and the Conservatives over ways to hit the wealthy in order to woo working-class voters. Theresa May promised on Monday to force big companies to publish information on the pay gap for minority ethnic workers, extending plans that relate to gender.

That came after the Tory party unveiled a package that included statutory rights to unpaid leave for carers and bereaved parents and fresh protections for employees with mental illness.

Corbyn will unveil his new policy in Bradford as part of a radical manifesto. It will promise sweeping renationalisation of the railways, Royal Mail and parts of the energy market, with the water industry also likely to feature in the plans to take private companies back into public ownership.



The party will promise to plough an extra £6bn a year into the NHS and £1.6bn into social care as well as extend 30 hours of free childcare to all two-year-olds.



Sources said the shadow chancellor, John McDonnell, told colleagues at Labour’s meeting to finalise the manifesto that pledges would cost £55bn, while the party planned to raise £57bn through measures including higher taxes.

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Corbyn will describe his offer as a “programme of hope”, while claiming that May’s offer is built on fear.

“The record proves one thing: the Tories are still the nasty party, the party of prejudice, the party of the rich, the party of the tight-fisted and the mean-spirited,” he will say, urging the prime minister to “come out of hiding” and take him on in television debates.

“What are you afraid of? It’s not too late. Let’s debate our two manifestos. Have the argument,” he will say, insisting that Labour’s aim is to tackle a “Britain run for the rich, the elite and the vested interests”.



ITV’s Robert Peston confronted the prime minister on Monday during a Facebook Live session in which she fielded questions from members of the public, with a request from a “Jeremy Corbyn in Islington” to face him in a televised debate.

“What is more important is that I and he take questions directly from the voters,” May said, claiming that people did not get much from watching politicians “have a go at each other”.

The Tories hit back at Corbyn and described his policies as a shambles. The chief secretary to the Treasury, David Gauke, said: “His economic ideas are nonsensical, his views on national security indefensible – and he’d make a total mess of the Brexit negotiations.”

Corbyn will promise Labour will investigate reorganising the UK along federal lines as part of reforms to reduce Westminster’s dominance.

In a major switch in the party’s thinking, the manifesto will say a new constitutional convention it is establishing later this year will “consider the option of a more federalised country”. It will also commit Labour to the eventual goal of scrapping the House of Lords and replacing it with an elected senate and extending the power of regional and local government.

Launching the policy on excessive wages, Labour will point out that pay for CEOs in the FTSE 100 has risen by 33% since 2010 and now stands at £5.5m, with the ratio of pay to average earnings up from 150:1 to 183:1.



One insider argued that any link between huge financial rewards for staff and improved company performance was “thin to non-existent”.

“Voters are fed up with seeing executive pay levels soar at a time when living standards for working families are falling. This levy will put pressure on companies to curb fat cat pay while bringing in some additional revenue to invest in public services,” they said.

The party will argue that by targeting multibillion pound companies, rather than individuals, the policy would not deter highly paid workers and would not see prices passed on to consumers.

There would be 100,000 workers – equivalent to 0.34% of all taxpayers – whose pay would qualify for the levies. Sources added that Premier League clubs, which would be affected, made £3.4bn in profit with an average wage bill of £134m per club.



A source said the levy would be charged annually and there would be no cap, meaning that companies and football clubs would need to pay well in excess of £200,000 for mega salaries over £5m. The policy is primarily aimed at deterring big payouts but it is estimated would raise £1.3bn.



The thresholds were chosen because they are 20 times the national living wage and 20 times the median wage. The policy comes on top of a 20:1 pay ratio cap on companies that have public contracts.

Labour was attracted to the idea of the levy after it was raised by the economist Faiza Shaheen, director of the Centre for Labour and Social Studies. She said: “Year after year we’ve seen pay at the top rise, while average wages have stagnated. Shaming companies publicly has failed to change the status quo; an excessive pay levy attempts to force companies to think twice about unfair wages at the top while generating income for our public services.”