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Sunday, July 25, 2021

May set to make corporation tax pledge as olive branch for business

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Theresa May will suggest she will match Donald Trump’s expected cuts to corporation tax as she attempts to hold out an olive branch to business leaders.

In her first speech to the Confederation of British Industry (CBI) annual conference, the Prime Minister will stress her “aim” for the UK to maintain its status as having the lowest corporation tax rate in the G20 group of countries. The British rate of tax on company profits currently stands at 20% and is due to fall to 17% by 2020.

The United States’ president-elect has pledged to cut the federal business tax rate from 35% to 15%, raising the prospect of a further slashing of corporation tax in the UK.

Mrs May will also say the Brexit vote presents an once-in-a-generation opportunity not just to leave the European Union but to change the country to make it fairer forever.

The PM’s goal to ensure prosperity is shared more widely has been interpreted by some as anti-business, and her speech will seek to rebuild links with industry figures.

She will also announce plans to give science and research a funding boost worth £2 billion a year by 2020.

Mrs May will tell the CBI: “In the Autumn Statement on Wednesday, we will commit to substantial real terms increases in Government investment in R&D (research and development) – investing an extra £2 billion a year by the end of this Parliament to help put post-Brexit Britain at the cutting edge of science and tech.

“And we will also review the support we give innovative firms through the tax system … because my aim is not simply for the UK to have the lowest corporate tax rate in the G20, but also one that is profoundly pro-innovation.”

The Prime Minister will insist she will “always believe in business” and the benefits it brings.

But she will stress firms need to do “more to spread those benefits around the country, playing by the same rules as everyone else when it comes to tax and behaviour, and investing in Britain for the long-term”.

Mrs May will say: “We believe in free markets. They are the means by which we spread opportunity and lift people out of poverty.

“We believe in capitalism – the means by which we drive economic growth, putting people into work to provide for their families.

“And we believe in business – the entrepreneurs and the innovators who employ millions of people up and down this country – the basis for our prosperity.

“The Conservative Party – and the Government I lead – will always believe in these things.

“But I am here today not just to reaffirm these core beliefs, but to say that – if this is what we value – we need to be prepared to adapt and change.

“For if we support free markets, value capitalism and back business – and we do – we must do everything we can to keep faith with them.”

The extra investment for science and business marks the first step in Mrs May’s industrial strategy, which is “not about propping up failing industries or picking winners, but creating the conditions where winners can emerge and grow”.

Alongside the funding boost, Mrs May will outline plans for an industrial strategy challenge fund designed to improve the country’s “relatively weak” ability to commercialise innovations developed in the UK.

It will be targeted at emerging fields like robotics and artificial intelligence, industrial biotechnology and medical technology, satellites and advanced materials manufacturing.

Mrs May will also announce a Treasury review of tax breaks for UK research and development (R&D) organisations to look at whether R&D tax credits can be increased further from £2.5 billion a year.

Jeremy Corbyn will also address the conference and tell industry leaders that “Labour will be on the side of the innovators, entrepreneurs and investors” as long as they “live up to their side of the deal” by treating workers fairly.

As part of a concerted push to build links with business, the Labour leader will say companies must pay decent wages, respect workers’ rights and pay the taxes they owe.

In return, a Labour government would use a £500 billion national investment bank to “break the logjam” in bank lending which has “starved” small and medium-sized companies.

It will be focused on helping firms join in the “fourth industrial revolution” powered by the internet of things and “big data”.

He will insist he has a mandate for change from the Brexit vote and Donald Trump’s election as US president, which showed that the current economic system has been rejected by voters faced with “ballooning” inequality and falling or stagnating living standards.

Mr Corbyn will say in central London: “Labour is setting out the path to a better alternative that’s about good intervention. In fact, it’s intervention for the common good.

“Labour wants to engage with business and the workforce at all levels to design an industrial strategy that meets the needs of 21st century Britain.

“That isn’t about picking winners or pouring good money after bad into white elephants.

“Instead, we will set the missions, put in place the right institutional framework and support, and provide businesses with the opportunities to develop our economy.

“Provided, of course, that businesses live up to their side of the deal – on wages, on workers’ rights, on paying taxes.

“We want our relationship with business to be a partnership: Labour’s new settlement for business.”

Mrs May will present the tax cuts and investment as part of a grand bargain with business in exchange for improved corporate behavior.

Writing in the Financial Times, she said she would use her speech to “ask British business to work with me: helping to shape this new approach, setting the template for others to follow, and calling out what is bad in order to promote what is just and good”.

She said: “I will always be one of the strongest advocates for the role businesses play in creating jobs, generating wealth and supporting a strong economy and society.

“Yet we must recognise that when a small minority of businesses and business figures appear to game the system and work to a different set of rules, the social contract between businesses and society fails – and the reputation of business as a whole is undermined.”

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