Chancellor Rishi Sunak has admitted that a decade of Tory tax cuts for business failed to boost investment in the UK economy or raise extra revenue for the Treasury.
Cuts to corporation tax by successive Conservative governments have cost the Exchequer £95 billion over the last few years – money that could have been spent on our NHS, schools and keeping police on our streets.
For more than a decade, the Conservatives argued, as the Prime Minister did in 2019, that “every time corporation tax has been cut in this country it has produced more revenue”. Since 2010, the headline rate of corporation tax has been cut from 28 per cent to 19 per cent.
But this week, the Chancellor Rishi Sunak confessed that “we haven’t seen a step change in the level of capital investment that businesses are doing as a result of those corporation tax cut decreases.”
He also admitted the cuts did not directly raise revenue, saying that any rise in corporation tax receipts that concurrent with falling rates was due to a cyclical uptick in business profits.
In 2017, the Conservatives’ own twitter account claimed tax cuts meant “more money for public services” whilst as far back as 2015, the Conservatives were also arguing that any rise to corporation tax would reduce growth and cost “10,000 jobs.” Sunak’s move this week has completely discredited that argument and the ideology that underpins it.
Labour has long argued for increases in corporation tax to bring the UK back in line with comparable economies. The OBR document published alongside this week’s Budget confirmed that increasing corporation tax will raise £17.2 billion in 2025/26 – more than the entire police budget.
Anneliese Dodds, Labour’s Shadow Chancellor, said:
“Labour has argued for over a decade that cuts to corporation tax don’t boost investment or raise extra revenue – they just cost the Treasury billions that could have been put to better use.
“We welcome the Chancellor’s conversion to our point of view, but we can never get back the £95 billion lost to the Treasury over the last few years from this economically illiterate tax cut.
“That money could have been used to strengthen our economy going into this crisis. Instead the Conservatives slashed salaries for key workers, ran down our schools and hospitals, and cut 21,000 police officers from our streets.
“Never again should any Conservative government be allowed to use such a discredited economic argument to weaken the foundations of our country.”