LONDON (Reuters) -Britain’s opposition Labour Party, ahead in opinion polls, said it would launch a review into business taxes with the aim of creating a stable environment for investments, a chronic weak spot in the economy.
Opinion polls currently put the Labour Party, led by Keir Starmer, around 20 points ahead of Prime Minister Rishi Sunak’s Conservatives, with the next national election expected in 2024.
Labour criticised the Conservative government’s “chaotic” approach to business taxation, marked by several changes to corporate tax rates and incentives in recent years that the party says has deterred investors who seek stability.
British business investment has stalled since the 2016 Brexit vote, lagging behind peers France, Germany and the United States over the same time frame, according to data from the Organisation for Economic Co-operation and Development.
In a speech on Tuesday, Labour finance spokesperson Rachel Reeves outlined plans for the review of business taxes ahead of the Conservative government’s annual budget on March 15.
“What businesses need are certainty, consistency and incentives for investment,” Reeves told manufacturing association Make UK in London.
Labour says Britain should move in lockstep with the rest of Group of Seven economies on corporation tax, and Reeves urged finance minister Jeremy Hunt to resist “the siren calls from some in his party to cut corporation tax” at the budget.
But she added Labour would support any genuine, affordable moves in capital allowances that support business investment, and the party would offer such targeted allowances.
A previously announced increase in the headline rate of corporation tax, to 25% from 19%, is due to come into force in April. Hunt has said he wants to cut business taxes, but only once the public finances allow it.
“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,” Reeves said.
“So it’s no wonder businesses are unable to plan, and our investment rates are cratering.”
Labour said its review would look at how the tax system can incentivise businesses to direct profits into investment, rather than a short-termist focus on share buy-backs and dividends.
It said its tax plans would comprise a long-term framework to give businesses certainty over government policy over a period of years.
In a move that drew comparisons with the Labour government of the 1960s, Sunak last month launched a ministry for science, innovation and technology, part of his ambition to create the world’s “next Silicon Valley” in Britain.
(Reporting by Andy Bruce and Alistair Smout; Editing by Shounak Dasgupta and Bernadette Baum)
