The Liberal Democrats have accused the Government of planning to give big banks an effective tax cut of more than £6 billion over two years, as Liz Truss plans to axe the proposed increase in corporation tax.
The pledge to change course on the planned rise in corporation tax was a centrepiece of Ms Truss’s campaign to become Conservative leader, with the change expected to form part of the Chancellor Kwasi Kwarteng’s mini-budget on Friday.
But Liberal Democrat leader Sir Ed Davey hit out at the plan, calling it “shameful” as he cited new research suggesting that big banks and finance companies would see tax cuts of £2.6 billion in 2023/24, followed by another tax cut of £3.6 billion the following year.
The research, by the House of Commons Library, was commissioned by the Lib Dems and the party is calling on the Prime Minister and Chancellor not to go ahead with the plan to freeze the tax.
The finance and insurance industry, the party said, would benefit more than any other sector from the plan.
“It is shameful that the Conservatives are choosing to cut taxes for the big banks, while leaving families and pensioners still struggling to pay their bills this winter.
“The action taken by the Government will still see people’s energy bills double compared to last year. Meanwhile, big banks will be celebrating a bumper payday under the Conservatives as families have to choose between going cold or hungry.
Ms Truss, who has taken charge in Number 10 amid an unprecedented cost-of-living crisis and surging inflation, has placed tax cuts at the centre of her plan to spur growth in the UK.
Speaking in New York to bosses from firms including Google, Microsoft and JPMorgan Chase, the Prime Minister said that her Government wanted “lower, simpler taxes in the UK to incentivise investment, to get more businesses going in the UK, but also to encourage more people to go into work”.
Commons Library researchers calculated the tax savings expected for the financial and insurance industry by multiplying each industry’s average share of corporation tax liabilities in 2017/18 and 2019/20 by the estimated revenue that would be raised in 2023/24 and 2023/24 from increasing the rate of corporation tax to 25% as planned.
“It is time Liz Truss put the British people first by scrapping this bankers’ tax cut and helping hard-pressed families instead,” Sir Ed said.
The Treasury has been contacted for comment.