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Leaders lay out business policies to CBI

The leaders of the three largest political parties outlined their policies for business at the CBI conference on 18 November. Rebecca Cave rounds up some highlights and low points of the presentations.

19th Nov 2019
Tax Writer Taxwriter Ltd
Columnist
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CBI conference
CBI
CBI Director-General Carolyn Fairbairn

Each leader had around ten minutes to speak and another ten minutes to answer questions from the audience.

Conservatives

Boris Johnson reassured his audience that Sajid Javid will retain his position as his Chancellor of the Exchequer if the Conservatives are returned to government. So perhaps Javid will be able to present his Budget Statement in the Spring, as his Autumn Budget was washed away by the dissolution of Parliament for the election.   

However, this didn’t stop Johnson stepping into Javid’s shoes to announce a significant about-turn in tax policy.

The main rate of corporation tax was due to fall from 19% to 17% on 1 April 2020, but the next Conservative government will keep this rate at 19%. Johnson claimed this would raise an extra £6bn for public services. There was no mention of the special corporation tax rates which apply to ring-fenced profits in the oil and gas industry, which have been held at 30% and 19% since 2008.

When the cut in corporation tax was announced by George Osborne in 2016, the argument put forward was that more revenue would be raised due to the operation of the ‘Laffer curve’. Indeed, corporation tax receipts have increased since 2010, although the headline rate of CT has been repeatedly cut since then.

The Institute for Fiscal Studies (IFS) argues that this doesn’t mean the rate reductions have increased revenue, as most of the extra revenue over that time is due to the recovery of the economy from the 2008 crash.

Dame Carolyn Fairbairn of the CBI responded to the decision not to cut corporation tax saying the CBI could “work with” his decision on corporation tax as long as there were improvements in other areas.

Labour

Jeremy Corbyn was quick to promise large-scale investment in transport, full-fibre broadband and education for workers, as well as the nationalisation of key public services such as water, railways, buses and energy.

The tax increases to pay for this massive government spending were less obvious, other than those at the top would have to pay more. He said a Labour government would “put an end to the tax tricks that allow the wealthiest individuals and the biggest corporations to avoid paying their way.” The prevailing view from the tax profession on this statement is that this particular money tree has been shaken before, and may now be bare of easy fruit.

Other tax promises included tweaking the apprenticeship levy to train engineers, technicians and construction workers needed to transition to a green economy. The AAT immediately welcomed this reform, which will allow businesses to use the funds for a wider range of training and allow more time to spend the amounts businesses can draw from the levy fund.

Liberal Democrats

Jo Swinson completed the leaders’ presentations with a clear justification of the policy of revoking article 50 and stopping Brexit should the Lib Dems form a government after the election.

She promised a £50bn “remain bonus” generated by a 1.9% increase in GDP over the five years to 2024/25 compared to where the economy would be if the UK leaves the EU.

Swinson also promised investments in infrastructure and a green investment bank. Clarity on where the money was going to come from, other than the “remain bonus” was in short supply.

The only tax policy mentioned was a promise to scrap business rates and replace them with a landowner levy. A BBC journalist asked: “Will this landowner levy be passed on to businesses in the form of higher rents?” Swinson admitted that at least some of the levy would be passed back to the tenants.

The CBI responded to Swinson’s proposal for a landlord levy by stating: “Moving to a land value tax is mired in complexity, and it remains unclear how it would cut overall costs or provide a level playing field. Much more detail will be needed.”

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