Labor is to review the UK business tax regime as part of efforts to make Britain the fastest-growing economy in the G7, shadow chancellor Rachel Reeves will announce on Tuesday.
Reeves, giving a speech in London to the annual conference of Make UK, the trade body for Britain’s manufacturers, will say the review is intended to find ways of boosting business investment to fuel growth.
Companies’ capital spending in the UK has stagnated since around the time of the Brexit referendum while, over the same period, business investment has increased by 25 per cent in France, 22 per cent in the US, and 7 per cent in Germany, according to to official data.
Sir Keir Starmer last month set out five key “missions” for the next Labor government, including the goal of the UK becoming the fastest-growing economy among the G7 group of nations.
Reeves will blame “uncertainty and political instability” for low levels of UK business investment, accusing the government of a “chaotic eleventh hour approach”.
Business groups have complained that when UK corporation tax rises from 19 per cent to 25 per cent in April, the government’s two-year “super deduction” scheme for capital spending, offering 130 per cent tax relief on companies’ purchases of equipment, will have just expired.
Groups including the CBI employers’ organization have called for new tax breaks in Chancellor Jeremy Hunt’s Budget on March 15 to boost business investment.
Reeves will criticize the super-deduction scheme as a “short-term fix”, but will say that if the government uses the Budget to unveil a boost to investment and it is affordable, “we will back it to help get our economy growing again”. “.
Reeves will say that the corporation tax has “gone up and down like a yo-yo. , , it’s no wonder businesses are unable to plan and our investment rates are cratering”.
Greg Hands, Conservative party chair, said corporation tax at 25 per cent would still be lower than at any point during the most recent Labor government, when the levy averaged 29.6 per cent.
Meanwhile, Make UK chief executive Stephen Phipson will renew calls for the government to unveil an industrial strategy to boost growth.
Phipson will also call for the UK to have a better political and trading relationship with the EU.
A Make UK survey found that almost half of British manufacturers said EU suppliers were more cautious about sending goods to them compared to a year ago.
The survey also found that 40 per cent of manufacturers have increased their use of UK suppliers in the past year as a result, with a similar proportion saying they planned to do so in the next 12 months.
Phipson will say: “We need to reset our political and trading relationship with the EU which has been marked by such rancour.”