Labour sets out plan for tax review to provide businesses with stability
A future Labour government would commit to a review of business taxes and move away from an “11th hour approach” which the party says is holding back investment.
Shadow chancellor Rachel Reeves, in a speech to manufacturing sector leaders on Tuesday, is due to commit to a review of corporate taxes in a bid to create a stable investment environment.
Setting out Labour’s approach if it wins power at the next election, Ms Reeves will say that a Sir Keir Starmer premiership will “put an end to uncertainty” for firms when it comes to the taxes they face.
She will argue that the “answer is not unfunded tax giveaways” – as seen during the short-lived Liz Truss premiership – but that the priority should be using the tax system to support investment into the UK.
Following reports Chancellor Jeremy Hunt will refuse to bow to Conservative pressure to row back on plans to increase corporation tax in his Budget next week, Labour said it supported the hike.
Under proposals agreed while Prime Minister Rishi Sunak was chancellor, corporation tax is due to rise to 25% from 19% next month.
Labour officials said the party’s review will look at how investment allowances “work best alongside the current rate of corporation tax”, with the Opposition outfit “dismissing the siren call of some that the government should cut corporation tax”.
The party instead argues that Britain should be in “lock step” with G7 nations on the rate of the business tax, and investment should be incentivised “through targeted allowances” to promote growth.
Labour also said the taxation review will set out how to build more stability and certainty for business into the tax system, including by potentially establishing a “road map for tax” which lasts over a parliament – usually around a five-year period.
Thirdly, the promised review would consider how to affordably support investment in the tax system and whether the current system of capital allowances is fit for purpose.
Finally, Labour would investigate how the tax system can effectively encourage investment of profits and revenue rather than more share buybacks and dividends.
Speaking at the Make UK Conference in central London, Ms Reeves is expected to say that business leaders she has met have a “deep sense of frustration” due to “too much being squandered amidst political dysfunction and economic instability”.
She is set to add: “Central to a mission-based approach – central to strong investment – are stability and certainty in place of chaos and an 11th hour approach that hampers investment and growth.
“Nowhere is that clearer than in our tax system.
“In recent years, corporation tax has gone up and down like a yo-yo while the Government has papered over the cracks with short-term fixes like the super-deduction.
“So it’s no wonder businesses are unable to plan and our investment rates are cratering.
“The answer is not unfunded tax giveaways – we’ve seen where that takes us.
“But Labour knows that there is a role for the tax system in supporting investment.
“As chancellor, I will put an end to that uncertainty by providing stability in business taxation and so today I can announce that Labour will do a review of the business tax regime.
“The review will look at how we can build more stability for businesses in the tax system, and drive that crucial investment forward.
“What businesses need are certainty, consistency and incentives for investment. Labour will provide that.”
Conservative Party chairman Greg Hands said: “We don’t need Labour to do a tax review to know that they’d put taxes up on business.
“Corporation tax remains lower than it was at any point of the last Labour government.
“Only the Conservatives have a plan to support businesses with our five priorities for Britain.”