- Written by Sam Francis
- BBC News political reporter
Labor has pledged not to increase corporation tax if elected as part of its bid to win support from businesses in the run-up to the general election.
Shadow Chancellor Rachel Reeves said the tax rate would be capped at 25% but could be lowered to make it more “competitive”.
He said Labor’s pledges would bring “stability” to businesses, which had already seen 26 changes to business tax in the last parliament.
Mr Reeves was speaking at a day-long summit with Labor and business leaders.
In his keynote address, the Shadow Chancellor said 14 years of economic uncertainty under Conservative government had caused “a sharp decline in investment” in the UK.
“I’ve heard over and over again that what companies want is stability, including taxes,” he said.
Corporate tax is levied on all profits of a company. The top corporate tax rate for companies with profits over £250,000 is 25%, lower than comparable rates in the US, Germany, France and other G7 countries.
Small businesses pay corporation tax on a sliding scale up to 19% for businesses with profits of £50,000 or less.
Ms Reeves regretted that the UK’s highest interest rates “strike the right balance between our country’s fiscal needs and the demands of a competitive global economy”.
Globally, 140 countries have agreed to impose a 15% global minimum corporate tax in 2021.
But he added that Labor would respond to rate cuts “if our competitiveness is threatened”.
“This means companies can plan their investment projects today with confidence in how their profits will be taxed over the next 10 years,” he added.
Labor announced on Wednesday that it would not reinstate the cap on bonuses for bankers that the Conservative government scrapped last year.
Mr Reeves said Labor would stand by two further recent government announcements.
As Prime Minister Jeremy Hunt announced in his autumn statement, the party plans to maintain full spending and allow businesses to amortize the cost of new investment. The annual investment allowance announced by Mr Hunt, which allows companies to deduct a portion of their investments from their taxable profits, will also be maintained.
Mr Reeves said that if Labor were elected, he would produce a business taxation “roadmap” within six months of being elected to give businesses certainty.
Her speech comes as Labor leaders step up efforts to win support from businesses ahead of the general election.
“There is no question, we campaigned as a pro-business party and we intend to govern as a pro-business party,” he told an audience of FTSE 100 chief executives and overseas investors.
Labor leader Sir Keir Starmer also spoke at the event, saying that if his party wins power, it will first implement economic reforms without “over-legislation” to avoid “bogging down”. He said the plan is to introduce waves.
In particular, he suggested that he wanted to reduce the number of ways new infrastructure projects could be undertaken through changes to planning guidelines in the UK.
Among those gathered at the Oval Cricket Ground was Iceland executive chairman Richard Walker, a former Conservative Party donor who switched to Labor this week.
Tickets for the event sold out in four hours and hundreds of people are said to be on the waiting list.
On Thursday, Chancellor Rishi Sunak hosted a panel discussion with small business leaders in Downing Street.
The Conservatives criticized Labour’s business credentials, pointed out the lack of entrepreneurs in the shadow cabinet and accused the party of changing its stance on the economy.
Chancellor of the Exchequer Laura Trott said: “Keir Starmer’s track record of making promises and then breaking them when it becomes inconvenient shows Labor is unable to provide businesses with the stability and certainty they need to invest. “There is,” he said.
Mr Reeves appears to be further watering down his 2021 pledge to spend £28bn a year on building a ‘green economy’.
In June 2023, Mr Reeves said the £28bn would not be spent on the first day of a Labor government, but would be a target for the second half of the Labor government.
Asked on Thursday if Labor remained committed to the plan, Reeves said: “All policies must be consistent with our fiscal rules and the Green Prosperity Plan is no exception.”
She did not specifically mention the £28bn figure.
Labor’s fiscal rules are to borrow only for investment, to eliminate deficits with day-to-day spending, and to ensure that government debt is reduced by the end of the next parliament.