Reduce corporation tax to help firms, Patel tells Hunt
Former home secretary calls on Chancellor to reverse planned increase in levy in the Budget
PRITI PATEL has urged Jeremy Hunt to “back business” and cut corporation tax in next month’s Budget.
The former home secretary said it was not too late for the Chancellor to reverse April’s planned increase in the levy from 19 to 25 per cent. In an article for The Daily Telegraph, she also calls on the Government to pull out of an international agreement that corporation tax should never be reduced to below 15 per cent.
Ms Patel suggested there was little point withdrawing from the EU if the Government was going to ratify the agreement, brokered last year by the Paris-based Organisation for Economic Cooperation and Development.
Ms Patel said: “It is not too late for the Chancellor to back business and end the current political obsession of regulation, high taxes and interference with business. The Chancellor must send a positive signal to business in the Budget which supports jobs and economic growth. Now is not the time for an increase in corporation tax.
“Just like the issue of the OECD agreement, everything needs to be paused for the benefit of businesses around the country.”
The comments represent Ms Patel’s first major intervention since she left the Cabinet in the wake of Boris Johnson’s departure.
There is a mounting revolt from Tory backbenchers over the need for tax cuts to stimulate growth. The politicians point to better-than-expected economic indicators and the revelation Britain received £5.4billion more in taxes in January than it spent on public services.
But the Treasury has downplayed hopes that the money could be used to fund tax cuts in the March 15 Budget.
Business leaders have also called for the corporation tax rise to be scrapped.
Yesterday, British Airways suggested that the levy risked increasing holiday prices.
As it recorded its first annual profit since the pandemic, IAG, the FTSE 100 company that owns British Airways, Aer Lingus and Iberia, warned that increases in its costs will ultimately be borne by passengers.
Nicholas Cadbury, the company’s finance chief, said: “The higher the tax, the higher hurdle you need to do [any new investment] – and it gets passed on to the customer in some way.”
Mr Cadbury added: “What we are trying is to encourage the governments both in the UK and Spain and Europe to think about how they encourage investment.” Earlier this week, Simon Lowth, BT’S chief financial officer, warned that Mr Hunt will send Britain in a “drastically anti-investment direction” if he forges ahead with the levy.
And Sir James Dyson, the entrepreneur, criticised the Government’s “shortsighted” and “stupid” approach, arguing that the Tories seem to think “penalising the private sector is a free win at the ballot box”.
Ms Patel also criticises the decision made by Britain to join 134 other countries in signing a deal not to reduce corporation tax below 15 per cent.
The plan was designed to make it harder for global digital giants to avoid tax by choosing to pay it in low-tax countries. But Ms Patel said it takes away countries’ independence.
The Government plans to ratify its agreement with the OECD as part of the finance bill that will enact the March Budget.
Without competition stimulating innovation, quality, lower prices and a good deal for the consumer, capitalism would be nothing. Open markets, unimpeded by high levels of taxation, drive companies ever onwards to improve and win trade.
But nations must compete, too. Indeed, the knowledge that, free to make her own rules, Britain could act more competitively, was a principal driver of Brexit. That is why it is so incomprehensible that corporation tax is set to rise this year to 25 per cent. Alongside the removal of tax deductions for investment-oriented businesses, the hike will make Britain a much less desirable location for large international companies, on which we rely to create jobs and fuel growth. The Government would be wise to abandon the move.
Yet as former Home Secretary Priti Patel warns in these pages today, we may soon impose an extra impediment to tax cuts by agreeing to an international minimum threshold of 15 per cent, which has been concocted by the OECD, a Parisbased organisation. While it is, some might say, folly to dream of a world in which this country imposes a corporation tax rate as low as that, a time may – and should – come when the Treasury understands that high corporate taxes breed stagnation, and seeks to lower the rate to attract investment.
The risk then is that, having overcome the inertia of the British state, we would be confronted by this additional hurdle, with any attempt to circumvent it denounced as an abrogation of international commitments. As Priti Patel puts it: “Our economic freedoms are once again at risk and our Conservative mission to transform Britain into a global beacon for free enterprise faces a new challenge.”
While the deal is gloomy enough, the reasons behind it are gloomier still. Thirty years ago, with the collapse of the Soviet Union, a political scientist popularised the term “the end of history”, as if Western politics had reached a perfect model and needed no further refinement. That did not last long.
Today, faced with ageing populations, we have seen the emergence of a similarly sludgy consensus: that we are comfortable enough as it is, and that we don’t need to develop much more. This is smothering Western economies. The reverse is true. Without a renewed commitment to growth and making our societies richer and happier, today’s smug economic unanimity will prove as divisive and explosive as its political predecessor.
The Government should now focus on stimulating investment from companies, large and small, which can boost innovation and growth – first by rescinding the imminent tax hike, and in future by ensuring no minimum tax is agreed to.
China’s Ukraine strategy
China has produced a “peace plan” for Ukraine that is not worthy of the name, overlooking and excusing Russia’s unprovoked aggression. The plan’s suggestion that “all parties must … avoid fanning the flames and aggravating tensions” is a more-or-less explicit call on Western countries to stop providing weapons to Kyiv, even as Beijing seems to be considering supplying lethal aid to Moscow. Hearing Jens Stoltenberg, Secretary General of Nato, warn yesterday that doing so would represent a “very big mistake” and that “this is very serious” underlines the gravity of the moment. China, as Stoltenberg points out, would then be supporting an illegal war of aggression, violating the UN charter.
It is to be hoped that rather than formally allying with Russia, China is merely aiming to exploit the war for its own ends, profiting from cheap Russian oil and gas that no longer has a market in the West. As China’s top diplomat Wang Yi noted during a meeting with Vladimir Putin this week: “China [and Russia] often face crisis and chaos, but there are always opportunities in a crisis.” Xi Jinping may soon head to Moscow further to seize those opportunities.
China is able to manipulate events this way because it is operating in a diplomatic vacuum. No other power is discussing how the war might end, or the steps to get there. The West’s unwavering financial and military support is critical, but it is not a long-term strategy. This leaves the field clear for Beijing’s unreasonable proposals. We can expect similar interventions until we begin to outline what the end could look like. As time goes by, not doing so carries the growing risk of being dangerously overtaken by events.
Bowdlerised Dahl
Parents may in future buy two versions of Roald Dahl’s children’s books, just as they can choose between semiskimmed or full-fat milk. One version, published by Puffin, will come without such phrases as “great flock of ladies”, “horsey face” or “little pot-bellied dwarf ”. Sensitivity readers will have pulled out any little weed of unwokeness. Another version, published by Penguin, owned by the same company, will preserve the full fat of the author’s imagination. We are back in 1818 when Thomas Bowdler published an edition of Shakespeare in which “those words and expressions are omitted which cannot with propriety be read aloud in a family”. Sex and frivolous references to religion were his enemies. Dahl is not Shakespeare, but his robust use of language made him an author enjoyed by millions.