Labour to oppose any Budget hike in corporation tax in extraordinary political reversal

Party could also vote against windfall tax on supermarkets to fund Covid recovery – which Rishi Sunak is believed to be planning

Labour says it will oppose any hikes in corporation tax on big business, in an extraordinary political reversal ahead of next week’s Budget.

The party also did not rule out voting against a windfall tax on supermarkets, to fund the Covid-19 recovery – which Rishi Sunak is believed to be planning.

At the last election, Labour called for corporation tax to rise sharply, while the Conservatives – to the ridicule of most economists – claimed cuts could actually increase revenue.

Now the Chancellor is expected to put the country on the path to increasing the rate from 19 per cent to 23 per cent by the end of the parliament, or even as high as 25 per cent.

But, asked if the U-turn had Labour support, Treasury spokesperson James Murray said: “This is not the time to consider tax rises, we are in the middle of an economic crisis.”

Asked if Labour could vote against a windfall tax on the food giants – despite the billions it would raise for spending priorities – Mr Murray added: “Let’s see what the government put out in the Budget next week.

“What the government should be focusing on now is investment in growth to try to get the economy back on its feet.”

The stance is likely to fuel criticism of what some Labour MPs and supporters see as Keir Starmer’s caution, after his refusal to call for under-fire ministers to quit or criticise the Brexit trade deal.

The Labour leader has sought to draw a line under the Corbyn years by reining in what voters rejected as unrealistic pledges made in the 2019 election manifesto.

Since 2010, when the Conservatives entered government, the headline rate of corporation tax has been slashed from 28 per cent to 19 per cent – as the party claimed it would increase investment.

In fact, investment stalled because of austerity, economists argued, and then the uncertainty triggered by the Brexit referendum – even before the pandemic struck.

In December 2019, Labour called for the levy to reach 26 per cent for the main rate, plus a small profits rate of 21 per cent, to raise £23.7bn over four years.

At prime minister’s questions, Sir Keir hinted he now opposed any tax increases, telling Boris Johnson: “Now is not the time for tax rises for families and for businesses?”

Mr Murray, in a BBC interview, confirmed the stance included corporation tax, saying: “In the Budget next week, we don’t want to see tax rises. This is not the time to do that.”

The Chancellor is expected to argue he has space for pushing up the levy, with other cash-starved governments doing the same.

Janet Yellen, the US treasury secretary, said recently that corporation tax in the US could rise from 21 per cent to 28 per cent.