Labor will oppose any budget rise in corporation tax in an extraordinary political reversal

Labor says they will oppose any corporate tax hikes on big business, in an extraordinary policy reversal ahead of next week’s budget.

The party has also not ruled out voting against a one-off supermarket tax, to fund the Covid-19 recovery – which Rishi Sunak is said to be planning.

In the last election, Labor called for a big rise in corporation tax, while the Conservatives – to the ridicule of most economists – argued that the cuts could actually raise incomes.

The chancellor is now expected to put the country on a path to raising the rate from 19% to 23% by the end of the legislature, or even up to 25%.

But, asked whether the U-turn had Labour’s backing, Treasury spokesman James Murray said: ‘Now is not the time to be considering tax hikes, we are in the midst of an economic crisis.”

Asked if Labor could vote against a windfall tax on food giants – despite the billions it would raise for priority spending – Mr Murray added: “Let’s see what the government comes up with in the budget next week.

“What the government should focus on now is investing in growth to try to get the economy back on its feet.”

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

The Labor leader sought to draw a line under the Corbyn years by reining in what voters dismissed as unrealistic promises made in the 2019 election manifesto.

Since 2010 when the Conservatives entered government, the headline corporate tax rate has been cut from 28% to 19% as the party said it would increase investment.

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

In December 2019, Labor called for the levy to reach 26% for the main rate, plus a small profit rate of 21%, to raise £23.7bn over four years.

To Prime Minister’s Questions, Sir Keir hinted that he now opposes any tax hikes, telling Boris Johnson: ‘Now is not the time to raise taxes for families and businesses?

Mr Murray, in a BBC interview, confirmed that the position included corporation tax, saying: “In next week’s budget we don’t want to see tax increases. Now is not the time to do that. »

The Chancellor is expected to argue that he has room to increase the levy, with other cash-strapped governments doing the same.

Janet Yellen, US Treasury Secretary, recently said that US corporate tax could rise from 21% to 28%.