Corporation tax cut? Bring it on


CashBy Luke Bozier / @lukebozier

The 2011 Budget measure which stood out the most for me is the Treasury’s decision to put UK corporate tax on a downward trajectory over the next three-to-four years, which will result in Britain having one of the lowest corporate tax rates in the industrialised world come 2014. This is a measure which the Labour Party should be backing; it encourages enterprise and allows businesses small and large to keep money in-house for payroll and investment – thus creating much needed jobs.

Of course many in the Labour Party won’t come anywhere near supporting such a ‘Tory’ policy. But then, many of the fine people who run our party have never been anywhere near running a business in the private sector.

Job creation is the holy grail of today’s political zeitgeist, and so it should be. While the United States, with its more than positive attitude to free enterprise is adding jobs to its economy, Britain is still lagging and unemployment here is rising. Unemployment is a bad thing unto itself, but it has economic knock-on effects, some of which can become terminal. The state has to pay more in unemployment benefits, and people who remain unemployed for extended periods are at risk of depression and therefore of becoming a larger burden to the state long-term.

The size of Britain’s public sector over the last decade is part of the problem. When public finances are squeezed, public jobs are cut. If more of Britain’s jobs were less reliant on public money, our unemployment figures wouldn’t be so dire today. We need to do all we can as a country to encourage people to take risks and start small businesses, and to employ new staff members in businesses which already exist. That doesn’t have to be the intellectual territory of the Conservative Party. New Labour succeeded in part because it understood the needs of the private sector, and set about lowering the tax burden on British businesses. We need to take hold of our senses again and be the party of the small and medium enterprise.

In this globalised economy, which is set to become even more global over the coming decades, a country’s corporate tax rate matters. In some ways, it is a zero sum game; if an international company (not necessarily a behemoth corporation – there is a growing set of smaller companies with global scope) feels that the tax regime in country A is not conducive to business and investment, and country B’s tax rate is more attractive, country B will benefit from the job creation and economic uplift will ensue. Britain stands to benefit not only in supporting home-grown small and medium enterprises with a low corporate tax rate, but we will also attract more inward investment from foreign companies; a huge part of encouraging growth this parliament.

Lowering the corporate tax rate should be taken as part of a larger package of measures to boost enterprise. Labour should be the party coming up with innovative ideas in this area. Young people are leaving education with few job prospects; why not develop a scheme to put money in their hands and support behind them to start micro-enterprises, as early as 16 or 18. Countries like Chile are leading the way with innovative programmes like StartupChile, enticing 1,000 potential entrepreneurs from around the world to Chile with a residency permit and ,000 in cash to start small enterprises; Labour should be developing similar proposals for Britain. In the meantime, we shouldn’t be afraid to support lowering the tax rate on the businesses which are currently our only hope out of a sticky and destructive financial situation.

More from LabourList


We provide our content free, but providing daily Labour news, comment and analysis costs money. Small monthly donations from readers like you keep us going. To those already donating: thank you.

If you can afford it, can you join our supporters giving £10 a month?

And if you’re not already reading the best daily round-up of Labour news, analysis and comment…