Ed Miliband Vows to Cut Business Rates for Small Business
Ed Miliband is to pledge to help about 1.5 million small businesses in England by reversing a planned business rates rise if Labour wins the next election. The move would be paid for by reversing a planned UK-wide cut in corporation tax for “big business” in 2015. The Labour leader is due to make the policy pledge in his keynote speech to his party’s annual conference in Brighton later.
The Institute of Directors said Mr Miliband was “tinkering at the edges”.
The Conservatives said it was “yet more economic incompetence from the same Labour politicians who got us into a mess”.
Building on his vision of a One Nation Labour Party, set out in his conference speech last year, Mr Miliband will push the case for an economy based on higher skills and wages – and the “dynamism” of small business. He will tell Labour activists: “David Cameron talks about Britain being in a global race. But what he doesn’t tell you is that he thinks the only way Britain can win is for you to lose. He will say that means “the lowest wages, the worst terms and conditions, and the fewest rights at work – a race to the bottom”, adding: “The only way we can win is in a race to the top.”
He will pledge to take action on what he has called Britain’s “cost of living crisis”, setting out an alternative vision of Britain’s economy to that pursued by the Conservatives.
“Too many of the jobs we’re creating in this country are just too low paid, too many of the gains in our economy are just scooped up by the privileged few, including those big bonuses, and too often you are left being charged over the odds. “They used to say ‘a rising tide lifts all boats’. Now the rising tide just seems to lift yachts.”
Mr Miliband will also use the speech to outline what aides call “a roadmap” to tackle the housing crisis by building a new generation of new towns.
Business rates are due to rise in April 2015. If a Labour government came to power in May 2015, it would immediately reverse that rise for small firms so their rates fell back to 2014 levels. That rate would then be frozen for 2016.
The move would apply automatically only to businesses in England, but money would be given to the devolved governments in Wales, Scotland and Northern Ireland so they could follow suit.
Labour says House of Commons Library figures show this “effective tax cut” would cost £250m in 2015/16 and £540m in 2016/17.
Up to 1.5 million businesses with properties worth an annual rent of £50,000 or less would benefit, Labour believes. The party claims this would save small businesses, such as pubs, shops and hi-tech start-ups, an average of nearly £450 over two years, with some firms saving £2,000. The party says it would pay for this by reversing a planned cut in corporation tax from 21% to 20% which is due to come into force in April 2015. It claims this would save the Treasury £340m in 2015/16 and £785m in 2016/17. It says this “effective tax rise” would affect 80,000 large firms. If the corporation tax cut raised more money than expected, any cash left over would be used to cut business rates further, say Mr Miliband’s aides. The corporation tax change would affect the whole of the UK.
Labour aides said that while small businesses had seen their rates rise in recent years, big businesses had seen their corporation taxes fall by £6bn since 2010.
BBC political editor Nick Robinson said Mr Miliband wanted the proposal to show he was “on the side of the small guy”.
But the Institute of Directors said it would apply only to very small firms that had commercial premises with an annual rental value of £50,000. The business lobby group also expressed concern that even a small rise in corporation tax would send the wrong signal to potential foreign investors.
The director general of the CBI, John Cridland said cutting corporation tax was “one of the coalition’s greatest achievements, sending a clear signal internationally that the UK is open for business”. He said it would make more sense to overhaul the business rate system to create a tax system “that works for all firms – large and small”.
In recent days, the opposition has announced a series of initiatives intended to relieve what it says is the continuing squeeze on low- and middle-income families, including more free childcare and a commitment to “strengthen” the minimum wage. But delegates passed a motion on Monday calling on the Labour leadership to reverse its support for the coalition’s 1% cap on public sector pay rises.
Ahead of Mr Miliband’s speech, former minister David Lammy warned the party had lost momentum over recent months and it could not win the next election unless it improved its economic credibility. But Labour deputy leader Harriet Harman told the BBC that the momentum was with Labour. “Since 2010 when we lost the general election, we have won 1,950 new council seats all around the country,” she said. “And if you look at party membership, which has been on a long trajectory of falling across all the political parties, since Ed Miliband became leader we have increased our membership by 14%. Whereas with David Cameron, his party membership has fallen by 40%.”
Business Minister Matthew Hancock said: “Ed Miliband is calling for a tax rise on business that would cost jobs. “And because he would reverse our planning reforms, the only way Ed Miliband could deliver his promise to build more houses is to spend more and borrow more. “Tax rises on businesses and the same old Labour policy of more borrowing and more debt would undermine the recovery. And it’s hardworking people who would pay the price with their jobs, higher taxes and higher mortgage rates.”