Gordon Brown has hinted that he may introduce cuts in corporation tax if they are needed to ensure that Britain does not lose investment to its competitors.
The Chancellor told the CBI’s annual conference today: “We will continue to look with you at the business tax regime so that we persuade people that it is in Britain’s interests to make and keep the UK as the most competitive place for international business.”
The government would also work to “build on our successful research and development tax credit to create the best incentives and make Britain the best place for R&D.” But the Chancellor warned against short-termism, weeks ahead of the pre-budget report (PBR).
He said the choices to be addressed in the PBR included a choice between “drifting back to the era of fiscal irresponsibility and short termism” or having the strength to “continue to entrench monetary and fiscal stability for the long term;” and whether to “provide the incentives, the rewards for risk and agree the changes in education necessary to make Britain’s entrepreneurial culture match the enterprise of the USA.”
He pledged to face globalisation by addressing barriers -“tackling the old inflexibilities, the old vested interests” – standing in the way of Britain being “the best place to locate for skills and for R&D.”
He was determined to take the right long term decisions “at each point in this and the next cycle,” and confident of meeting “all our fiscal rules” while financing the key investment priorities including education, health, transport and law and order.
Brown said he would resist demands, such as linking pensions to earnings, that put the fiscal position today and in the long term “at risk.” Such short-termism was not the best way forward, he said.
Almost every one of the UK’s major competitors was grappling with high fiscal deficits and fast rising levels of debt, he said. “But at every point we have been able to meet our fiscal rules and as long as I am Chancellor we will meet all our fiscal rules – with stability yesterday, stability today, stability tomorrow.”
There were 300,000 more businesses compared to 1997, Brown said, but the rate of business creation was still half that of the USA. “The long term choice for Britain is whether we are serious about the incentives and rewards for risk, and about the changes in the school curriculum and in education generally necessary to create a long term revolution in attitudes to enterprise and wealth creation.”
Reductions in capital gains tax had shown that the Labour party was “already going beyond the old divisions and helping to forge a shared national consensus on enterprise culture,” he claimed. The government had also “cut corporation tax from 33p to 30p and small business tax from 23p to 19p.”
He added: “And in budget after budget I want the nation – and politicians on all sides, trades unionists and managers – to face up to the hard choices – whether it be in the tax system or in breaking down old barriers – to do more to encourage the risk takers, those with ambition, to turn their ideas into reality and make the most of their talents.”
