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Time for tax to get tough, says Mandelson

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6th Jan 2010
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The UK’s economic recovery cannot be supported without making some tough decisions about tax, argued Lord Mandelson, president of the Board of Trade in a speech to the Work Foundation this week.

“Given the tax rises on the better off imposed in the past year, tax is inevitably once again a hot topic of debate in the business community,” said Mandelson. “Setting tax rates for me has always been a matter of striking the right balance, not of ideology. In a difficult fiscal environment no credible government can rule out the need to raise taxes.  And we haven’t shirked from taking those tough decisions over the past year.

“But there is never a case for punitive taxation. There is never a case for rates of tax that remove the incentive to self-improvement or to build a business. Britain retains one of the most favourable tax regimes in the world for entrepreneurs who start a successful business and eventually sell part of their stake. Our 18% capital gains tax rate is among the lowest in the world and our corporation tax rate among the lowest in the G7. A competitive tax environment is something we must preserve.”

But he refused to back down from Labour's commitment to the new upper tax band.  “I believe that is justified in the quite exceptional circumstances we face,” he said. “It is right that in taking the tough decisions on tax needed to combat the deficit those with the broadest shoulders will bear the greatest burden.  I believe we have got this balance right.  But as a Government we will always be vigilant that this burden does not become so great that it damages our long-term competitiveness or inhibits those whose efforts will help us build sustainable growth.”

Mandelson also called for a new climate of enterprise supported by government in the UK. “There is no substitute for this - no substitute for the drive and ambition that it brings. It can sometimes be a touch ruthless and raw. But it is the single most important engine of economic progress. The recovery cannot be driven by consumer debt or public spending. It will be driven by private sector investment and private enterprise.

“Enterprise and reward go hand in hand.  Much as it shocked many of my friends when I said I was comfortable with people making themselves “filthy rich”, in the context I was speaking I was simply stating a simple truth - that enterprise and effort should be rewarded. It sets goals to spur people and brings gains to us all. And it is often forgotten that I added the important rider 'as long as people pay their fair share of taxes'.”

 

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