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Planned cuts to corporation tax next April are to be put on hold, Boris Johnson has told business leaders, with the money being spent on the NHS.
The rate paid by firms on their profits was due to fall from 19% to 17%.
But the PM told the CBI conference the move could cost the Treasury £6bn and the cash would be better spent on the “nation’s priority”.
Labour said business “handouts” had done real damage and the Tories would “revert to type” after the election.
In his own election pitch to employers and entrepreneurs, Jeremy Corbyn said business had “so much to gain” from a Labour victory and while the richest would pay more under a government led by him, there would also be “more investment than you have ever dreamt of”.
And Jo Swinson said the Liberal Democrats were the “natural party of business” because it wanted to cancel Brexit.
The first of the three leaders to take to the stage in London, Mr Johnson said business helped fund the nation’s number one priority by “creating the wealth that actually pays for the NHS”.
He said the Conservatives “believe emphatically in fiscal prudence” and had decided against going ahead with a further cut in corporation tax, a step first proposed by Chancellor George Osborne in 2016 to boost business in the wake of the Brexit referendum.
But many economists said the cut – which ministers were signalling would still go ahead earlier this month – would be potentially counter-productive, with a study based on HMRC data last year suggesting it could mean £6bn a year in lost government revenues.
Corporation tax is paid by businesses on their profits in the UK. It’s an important revenue-raiser, making up approximately 9% of the UK government’s total tax take.
Since 2010, corporation tax has fallen from 28% to the current rate of 19%.
However, Mr Johnson says a planned cut to 17% in April won’t happen if the Conservatives win the election. The PM says the move would have cost the government about £6bn a year.
This estimate appears to be based on an official costing, produced by HM Revenue & Customs.
Before Monday’s announcement, the Conservatives had been arguing that corporation tax cuts could lead to more government income. During this summer’s leadership contest, for example, Mr Johnson said: “Every time corporation tax is cut in this country it has produced more revenue.”
Total annual corporation tax receipts
£m
Actually, that’s not always the case. The amount raised in the two years following April 2008’s rate cut actually fell, for example.
It is true that corporation tax revenue has risen by about two-thirds since 2010, despite further cuts to the headline rate. But the independent Institute for Fiscal Studies says that is unsurprising given that 2010 represented the trough of the financial crisis.
Since then firms have become more profitable, resulting in additional corporation tax revenue for government.
Mr Johnson said the UK already had the lowest rate of corporation tax of “any major economy”.
“Before you storm the stage, let me remind you that this saves £6bn that we can put into the priorities of the British people including the NHS,” he added.
In response to Mr Johnson’s announcement, CBI director Carolyn Fairbairn said it “could work for the county if it is backed by further efforts to the costs of doing business and promote growth”.
The Conservatives are committed to giving the NHS an extra £20bn a year for day-to-day operations by 2023, and an extra £1.8bn in capital expenditure for new buildings and IT.
Labour’s plan is to raise corporation tax to 26% – the 2011 level – which it says will generate billions to be spent on its priorities, including health and education.
Shadow Chancellor John McDonnell said Monday’s freeze marked a “temporary pause in the Tories’ race to the bottom” on business taxes.
Turning to Brexit, the Conservative leader told the conference that while big business did not want the UK to leave the EU, his withdrawal deal would provide the certainty “that you want now and have wanted for some time”.
If elected with a Commons majority, Mr Johnson is hoping to get the agreement on the terms of the UK’s exit into law by 31 January, and begin talks with Brussels on a permanent trading relationship.
He also announced a review of business rates in England, with the aim of reducing the overall burden of the tax, as well as a cut in National Insurance contributions for employers, which already benefit from a reduction known as the employment allowance.
‘Central motor’
In his remarks, Mr Corbyn said businesses had “so much to gain” from a Labour government, which he said would invest billions in the nation’s infrastructure, education and skills training.
While he understood their caution about Labour’s nationalisation programme, he said, it was “not an attack” on the free market but would put the UK in line with European neighbours where key utilities and transport were in public hands.
“It is sometimes claimed I am anti-business,” he said. “This is nonsense. It is not nonsense to be against poverty pay. It is not nonsense to say the largest corporations should pay their taxes, just as small companies do.
“It is not anti-business to want prosperity in every part of the country, not just in financial centres in the city of London.”
The Labour leader also set out plans to train about 320,000 apprentices in jobs such as construction, manufacturing and design within the renewable energy, transport and forestry sectors.
It would be funded by diverting 25% of the funds that employers already set aside through the Apprenticeship Levy and topped up by any dividends over the cap paid into Labour’s Inclusive Ownership Funds – the party’s plan to give workers a 10% stake in their employers.
Ms Fairbairn said the business community shared Labour’s desire to increased investment but warned the opposition’s “massive instincts towards state intervention and ownership” put that at risk.
In her first address to the CBI as leader of her party, Ms Swinson said no-one claiming to want to “get Brexit sorted” was on the side of business, due to the negative impact she said it would have on investment and access to labour.
“With Boris Johnson in the pocket of Nigel Farage and Jeremy Corbyn stuck in the 1970s, we are the only one standing up for you,” she said.
Criticising the other two parties’ plans to spend on big infrastructure projects, she said her focus was on small business and skills. The party’s plan to replace “crippling” business rates with a levy paid by commercial landlords would help “rescue the High Street”.
Brexit Party leader Nigel Farage, who is not attending the CBI event, said politicians’ focus should be on helping small business and promoting what he claimed were the advantages of a no-deal Brexit.
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