Impose windfall tax on pandemic profits to wipe debt slate clean, says McDonnell

Many Britons facing ‘long trail of hardship’ after Covid is gone, says former shadow chancellor

Former shadow chancellor of the exchequer John McDonnell among those campaigning for change (Getty)

Former shadow chancellor John McDonnell has called for a windfall tax on those who have profited from the coronavirus pandemic to pay to cancel households debts caused by the crisis.

Writing in The Independent, Mr McDonnell said it was time to “wipe the slate clean” on high-cost and unmanageable debt built up by millions of Britons, including many key workers who have fought on the Covid-19 frontline.

In a swipe at Sir Keir Starmer’s high-profile economic speech on Thursday, which was criticised for containing only modest proposals for reform, he said: “There is a time for framing speeches and political positioning but there is also a time to get angry and a time to demand immediate action to help people survive.”

Mr McDonnell cited Citizens Advice warnings that an estimated 6 million people - including more than 20 per cent of key workers - have fallen behind on bills because of Covid-19.

And he said that number in severe problem debt is believed to have doubled to 1.2 million during the crisis.

The former shadow chancellor called for a Debt Charter to deal with the causes and consequences of debt.

Improved benefits and a £10-an-hour living wage, along with restored universal basic services, should be deployed to prevent people from getting into debt in the first place, he said.

He called for a cap on interest rate charges and a ceiling on overdraft fees and interest payments to “rebalance power between lenders and the indebted”.

And he said bailiff visits should be suspended at least until the whole of the UK has been vaccinated against Covid-19.

In his most radical proposal, Mr McDonnell said: “We need to wipe the slate clean. 

“That means a comprehensive package of debt cancellation, beginning with the worst kinds of debt: including high-cost debt, old debt, unmanageable rent and student debt, backed by a windfall tax on those that have profited from the pandemic.”

Writing ahead of Rishi Sunak’s Budget on 3 March, Mr McDonnell said the chancellor had “virtually ignored the debt burden many people have been forced to take on over the last 10 months as their incomes have either been cut or dried up totally”.

The Bank of England’s Andy Haldane has predicted a “coiled spring of demand” from people wanting to spend savings built up during the pandemic.

But Mr McDonnell said that other Britons were facing “a long trail of hardship, poverty and unmanageable personal debt unwinding” because of financial problems caused by Covid.

“Debt is an issue neglected by politicians for too long,” wrote the former shadow chancellor. “The time for action has come.”