“Biggest overhaul of business taxation in a generation” – Rachel Reeves’ speech

Below is the full text of the speech delivered by Shadow Chancellor Rachel Reeves to the Labour Party conference 2021 in Brighton.

Thank you conference. I joined the Labour Party 25 years ago. I had spent almost all my life growing up under Conservative governments. At my state school, my sixth form was two pre-fab huts in the playground. Our library was turned into a classroom because there were more students than space. And as for textbooks, there were never, ever enough to go around.

I learned at a young age that Conservative governments just didn’t care about schools like mine and the kids I grew up with. My mum and dad were both primary school teachers who worked around the clock to make sure the kids they taught had the best possible start in life. I’m really proud of that. But they had to do it in the face of an uncaring, short-sighted and out-of-touch Conservative government. I joined the Labour Party because I wanted to change all that.

And it’s what still drives me today. After 1997, the first election I could vote in, everything changed. Because Labour made a difference. A Labour government that drove down class sizes and hospital waiting times that lifted millions of children and pensioners out of poverty. And introduced the first ever national minimum wage. That is what a Labour government can do. And conference, we will do so again.

That is why it is such an honour to stand here now as your Shadow Chancellor, under the leadership of Keir Starmer. With a clear mission: to recognise and release Britain’s real wealth – the talent and effort of millions of people in every community across Britain who contribute so much and who can achieve great things, who deserve more recognition, and a government that is on their side. That is Labour’s vision for society. A vision that lies at the heart of the new approach to the economy that I want to set out today.

I’m here to talk about the economy. But not in the way that you might expect. Because our economy isn’t just lines on a graph, distant from most people’s lives. Our economy is about all of us. The places we live, the people we love, and the work we do. An intricate web in which we all play our part. I want to talk about those parts of the economy which form the very foundations of our communities. It’s the businesses which give life to our high streets. And it’s the tens of millions of people who care for the young, the old and the disabled.

Who drive the buses, trains and taxis which get people to work every morning. Who make sure we are provided with gas, electricity and water. Who keep us safe from harm. Who make sure stock reaches our supermarkets. Our schools, hospitals and care homes, and our most vaunted industries, rest upon these foundations. And the jobs and industries of the future will too. It’s what I call the everyday economy. It is what keeps Britain going and forms the beating heart of our economy even if too often that work is hidden from sight.

Just look at the state of things under the Tories. Empty shelves in our supermarkets. Snaking queues at petrol stations. Businesses waiting weeks for materials. The NHS forced to ration its blood tests. Government having to issue reassurances that it can even keep the lights on. Real anxiety for families and businesses. And Rishi Sunak missing in action. This government is incompetent, in denial, careless and chaotic. They are responsible for all this mess. The Tories have lost control.

These problems have been exposed by the government’s Brexit deal by their response to the pandemic and by a failure to plan for either. But they are the long-term results of a government which not only doesn’t care about the everyday economy but doesn’t even understand how it works. Conference look at the pandemic. It wasn’t the shareholders at outsourcing companies that got us through this crisis. Our kids weren’t banging pots and pans on their doorsteps for management consultants. No.

What got us through was the millions who put their health at risk to do indispensable work: the care workers; the delivery drivers; the cleaners; the supermarket workers; the staff in our NHS, our schools and all our frontline services. And I am delighted to be joined in the front row by delegates who work in some of those industries. To all of you, and to the millions more across the country who worked tirelessly in the most difficult of circumstances: on behalf of our movement and our country we say thank you.

But we don’t just say thank you. We promise you that a Labour government will give you the respect that you deserve. But what does this Tory government do? A pay-cut for key workers. £20 a week taken from Universal Credit. And now their jobs tax. All this, as food, fuel and energy bills soar. This government is out of touch. They have no idea of the challenges people are facing. And they have no respect for the people who’ve got us through this pandemic and keep our economy going.

Here’s an alternative: On Saturday, our deputy leader Angela Rayner set out Labour’s new deal for all workers. Zero hours contracts banned. Fire and rehire outlawed. Sick pay increased. Maternity pay, parental leave and flexible working from day one. And a higher living wage with fair pay agreements going above and beyond the minimum. Security. Fairness. Dignity. Respect. That is what a Labour government will do.

But conference, it’s not just our key workers losing out after eleven years of Tory misrule. I spent the best part of a decade as an economist at the Bank of England. My job was to analyse how the economy performed. So let’s look at the UK’s economic performance. Even before the pandemic: Growth rates falling behind our peers; productivity flatlining; our trade balance plummeting; the gaps between and within our regions growing; inequality widening; and pay growth stalling. And the Conservatives missing every one of the debt and deficit targets they set for themselves. With inflation rocketing people are feeling the squeeze at the supermarket checkout, the petrol pump and when their energy bills arrive as little luxuries move further out of reach.

We know that our national economy does well when the everyday economy is thriving. Let me tell you why. Because money that goes into the pockets of working people is money spent in shops, cafes and restaurants, creating growth and bringing shared prosperity. And if we want to drive up Britain’s productivity and wages with it, then it’s not just a few firms at the top but all our businesses, large and small who need to be feeling the benefits of new technologies and investment. And when our everyday economy is neglected it creates insecurity which leaves us exposed when a crisis hits.

The United States is enjoying the strongest recovery of any major economy built on the knowledge that wealth doesn’t just trickle down from the top but comes from the bottom-up and the middle-out. But the Tories just don’t get it. Instead of unlocking all that untapped potential in every community their instinct is to hang onto power and outsource responsibility to their corporate friends; to put short-term savings ahead of Britain’s long term economic security; to ignore inconvenient truths coming from employers as well as trade unions; and to treat elected local, regional and national leaders in Britain with contempt…

Because Tory ministers arrogantly think they know better than all them. And then they have the gall to make working people foot the bill for their failings. We need to do things differently to build a recovery that is strong, sustained and felt in every part of Britain, keeping wealth in all our communities.

Labour’s approach will be based on working together with businesses, workers and public bodies all pulling together in a national endeavour to rebuild Britain and to seize the opportunities of the future. It’s what Labour’s plan to buy, make and sell more in Britain is all about, using all the tools at government’s disposal to support businesses in this country. Bringing jobs back to Britain. Sorting out the government’s supply chain chaos. And not least, cleaning up the Tories’ Brexit mess. To get our economy firing all cylinders.

So believe me when I say: I am more than happy to take on the Tories when it comes to economic competence, because I know we can win. This isn’t a leap into the unknown. This is common sense. While the Tory government in Westminster spent millions on Serco’s failing test and trace programme, the Labour government in Wales, led by Mark Drakeford, built a highly effective contact tracing system, not by outsourcing, but by working closely with local leaders and health experts. This new approach, this spirit of partnership, is going to be at the heart of how we build that stronger everyday economy.

Last year the government tore up its own Industrial Strategy just when it was needed most, to shape the future of British industry after Brexit. Labour will lead a new era of industrial strategy working hand-in-hand with trade unions and with businesses. This is about helping British business lead the world in growing high-tech industries like life sciences, electric cars and renewable energy but we will do something that’s never been done before. We will have industrial strategies for the overlooked industries that make up our everyday economy sectors which have never before been the focus of industrial strategy like retail, hospitality and care.

The steps that I am outlining today represent an approach that is unapologetically pro-worker and unapologetically pro-business. This will mark a step change, a decisive shift towards the undervalued and the everyday. That is what a Labour government will do. A fresh approach means we need to look again at how our tax system works. Good public services have to be paid for. But how we pay for them is a test of our values. Today I want to share the principles that underlie our approach to taxation.

First, we will make the tax system fairer, ensuring that the burden isn’t just falling on the wages of working people, but that those at the top pay their fair share, too. Conference, how can it possibly be right that a police constable on £27,000 should be taxed at 32 pence in the pound, but someone making many times more from buying and selling stocks and shares should pay just 20 pence in the pound? That will not stand with Labour. I pledge that as Chancellor I will not be balancing the books on the backs of working people.

And here’s our second principle: We will bring a laser focus to efficiency in our tax system. There are hundreds of different tax breaks. Some are important, but too many simply provide loopholes for those who can afford the best advice. And added together they cost more than our entire NHS budget. So we will look at every single tax break. If it doesn’t deliver for the taxpayer or for the economy then we will scrap it.

And here are a couple that we’d scrap right away: Under the Conservative Party, private equity bosses who strip the assets of British businesses pay a lower rate of tax on their bonuses than workers do on their wages. That is indefensible so we will abolish it. And here’s another. Right now, private schools enjoy charitable status which makes them exempt from both business rates and from VAT at a cost to the taxpayer of £1.7bn every year. But conference here’s the truth: Private schools are not charities. And so we will end that exemption and put that money straight into our state schools. That is what a Labour government will do.

And here’s our third principle we will support our high streets. Every single high street business is a labour of love and a product of determination and enterprise that gives life to our everyday economy. They have faced huge adversity in the past year. And many are still struggling right now, with a cliff-edge in rates relief coming up in March. Four out of five retail businesses are warning they may have to close outlets if government doesn’t act.

So today we are calling on the government to freeze business rates next year and to increase the threshold for small business rates relief, giving small and medium sized businesses in all sectors a discount next year. And conference, to pay for those measures the government should increase the Digital Services Tax to 12% for the next year, to make sure online companies that have thrived during this pandemic are paying their fair share.

But the truth is our whole system of business taxation is not fair and it is not fit for purpose. How can it be when bricks-and-mortar, high street businesses are taxed more heavily than online giants? High street businesses pay over a third of business rates, despite making up only 15% of the overall economy. But when Amazon’s revenues went up by almost £2bn last year. How much did their tax go up? Less than 1%. If you can afford to fly to space, you can pay your taxes here on Earth.

So we will level the playing field and ease the burden on bricks and mortar businesses. Labour will take the bold action needed: to support those businesses, and make sure every community can enjoy a thriving high street, we will oversee the biggest overhaul of business taxation in a generation. So I can announce today that the next Labour government will scrap business rates altogether. And here is our guarantee: the system we replace it with will incentivise investment; promote entrepreneurship; reward businesses that move into empty premises. And no public services or local authorities will lose out from these changes. But most of all: this will make our system of business taxation fit for the 21st century.

Together, these principles of taxation – prizing fairness, efficiency, and support for business – comprise our approach to funding our public services. One which will support hard work, enterprise and adaptability. Recognising the value of work. Demanding efficiency. Supporting thriving high streets. Conference, that is what a Labour government will do. I want to make one thing abundantly clear. We cannot have a return to the failed approach of austerity. It wouldn’t deliver growth and it would be a disaster for our public services. The next Labour manifesto will set out a plan to raise living standards and opportunities across Britain.

But we can’t tolerate waste when it comes to public spending. Especially when it comes to the wasted money that goes to outsourcing companies. So I promise you that the next Labour government will carry out the biggest wave of insourcing in a generation. During the pandemic, £2bn was spent on government contracts awarded to friends and donors of the Conservative Party. Conference: let’s review some of the highlights of the Tories’ pandemic outsourcing bonanza.

£90m to one business which had donated £400,000 to the Conservative Party, not a bad return on their investment. £150m to a financial services firm to produce 50 million face masks that couldn’t be used! £350m to a company employing a sitting Tory MP, for test kits which had to be recalled. £30m to Matt Hancock’s pub landlord. And every single one of those cheques signed by Rishi Sunak. Conference, that is not what a Labour government would do. So I say today: to those who have secured Covid contracts and have not delivered, I give you notice. We expect that money back.

We will set up a team to go through every line of every failed contract where value was not delivered, and clawback every penny of taxpayers’ money we possibly can. Because that money belongs in our police. It belongs in our schools and it belongs in our NHS. Conference that is what a Labour government will do. We have a duty to pay careful attention to how public money is spent. Not for the sake of it. But because it is a question of respect: I know how hard people work for their wages and how carefully they manage their money. They rightly expect government to treat money with that same respect. And it is about respect for our public services. Because we know the difference they make.

So we will bring an absolute commitment to value for taxpayers’ money for every pound we spend and policy we implement. But we won’t stop there. The last Labour government granted operational independence to the Bank of England. It was a powerful and lasting contribution to Britain’s long-term economic stability. And in 2010 George Osborne created the independent Office for Budget Responsibility. It’s thanks to the OBR that we know the Tories have missed every one of their debt and deficit targets. Thanks, George, we’ll keep that.

So the next Labour government will make its own contribution to Britain’s economic architecture. Today I can announce that Labour will create a new, independent Office for Value for Money. It will be tasked with keeping a watchful eye on how public money is spent and equipped with meaningful powers so no government is allowed to mark its own homework. I do not take lightly the responsibility to see that public money is spent wisely and our public finances kept under control. Let’s be honest. That will involve tough choices – for me and for my colleagues. We will not shrink from those choices. Because growth, strong public services and social justice must be built on firm foundations.

Where the Tories have brought us ballooning debt, supply chain mayhem and spiralling inflation, we embrace fully our role as the party of long-term economic stability, of secure public finances and of economic growth. So with me in this role, Labour won’t be making promises we can’t keep or commitments we can’t pay for. That is why we would put in place fiscal rules that will bind the next Labour government to ensure we always spend wisely and keep debt under control, so that we have the means to transform schools, hospitals and communities, and pay for investment in the new industries and jobs that our country desperately needs. That is what a Labour government will do.

Now of course: value for money means knowing when and where not to spend. But it also means knowing when and where to invest – to prevent far greater costs further down the line. There is no better example of this than in the case of climate breakdown. The Office for Budget Responsibility is clear, the greatest cost to our public finances, as well as to our planet, will be if we delay and let the costs mount up for future generations to pay.

Delay means something else too it means missing out on the opportunities for British businesses to grow and lead the world, and to make sure more of those good jobs of the future are based here. This is all part of our plan to buy, make and sell more in Britain. We will work across our industries to tackle climate change, putting fairness alongside our environmental obligations, and ensure the solutions are developed with workers and trade unions, not imposed upon them.

As Chancellor, I will not shirk our responsibility to future generations. No dither, no delay. Labour will meet the challenge head on and seize the opportunities of the green transition. Let me tell you today what I will do as your Chancellor. I will invest in good jobs in the green industries of the future; giga-factories to build batteries for electric vehicles; a thriving hydrogen industry; offshore wind with turbines made in Britain; planting trees and building flood defences; keeping homes warm and getting energy bills down; good new jobs in communities throughout Britain.

In other words: protecting and strengthening our everyday economy. And to make this a reality, to unlock that potential, and protect our planet for future generations. I can announce today that I am committing the next Labour government to an additional £28bn of capital investment in our country’s green transition for each and every year of this decade. I will be a responsible Chancellor. I will be Britain’s first green Chancellor. Conference that is what a Labour government will do.

Friends, I was born under Jim Callaghan’s Labour government. Three happy months! But I wouldn’t see another Labour government until I turned 18. I don’t want my children to reach adulthood before they see a Labour government. I don’t want them to grow up in a country, which grows more unequal and divided, where those who contribute the most go unrecognised, and which fails to rise to the challenge of the climate crisis. Our mission starts with the everyday economy. With valuing and supporting the people, businesses and industries which kept Britain going before the pandemic, have done throughout, and will continue to do so. Overworked. Underpaid. Taken for granted. But conference: not with Labour.

Labour will tax fairly, spend wisely, and get our economy firing on all cylinders. Hard work met with fair reward. Investment in our schools and in our NHS. Action to match the scale of the climate crisis. Strong and lasting growth for every part of Britain. Working together to meet the challenges of the future. Now that is what a Labour government will do. Thank you, conference.