Britain’s opposition Labour Party will cap corporation tax at 25% if it wins the next election and will look to cut that rate if needed, the party’s finance policy chief Rachel Reeves told business leaders on Thursday.
Businesses have long complained about a lack of visibility on everything from tax levels to incentive schemes in Britain, which they say hinders their ability to invest and improve productivity.
Successive Conservative governments had steadily cut corporation tax in a bid to boost Britain’s competitiveness, but the COVID-19 pandemic and Russia’s war in Ukraine forced them to hike rates last year to cover higher spending.
Labour, seeking to offer stability to businesses, said it would cap corporation tax for up to five years if it wins an election expected in the second half of this year, and also maintain a major tax break on corporate investment.
“We will cap the headline rate of corporation tax at its current rate of 25% for the duration of the next parliament. And should our competitiveness come under threat, if necessary, we will act,” Reeves said.
Labour is seeking to position itself as the most business-friendly party in Britain ahead of the general election. Labour currently has a large lead over the governing Conservative Party in opinion polls.
The rate of corporation tax in Britain had fallen from 30% in 2007 to 19% in 2017. It was raised in April 2023 to 25%, the highest level since 2011, as the government sought to raise revenue to cover spending on the coronavirus pandemic and subsidising soaring consumer energy bills.
Reeves also said she would maintain permanent full expensing – a tax break on business investment – and publish a roadmap for business taxation in the first six months of a Labour government.
The full expensing tax break was introduced by Prime Minister Rishi Sunak’s party as a way to offset the 2023 rise in corporation tax. In November the Conservatives said the relief, which applies to investments in plant and machinery, would be made permanent.
In their own pitch to woo voters, the Conservative Party also cut a range of personal taxes last November and had been eyeing further cuts at a budget due on March 6, but finance minister Jeremy Hunt on Wednesday said public finances might not allow that.
In her speech, Reeves said a Labour government would offer stability compared with the Conservatives, pointing to the fact that there have been five prime ministers and seven finance ministers during their time in power.
(Reuters)