Writing in City A.M., Matthew Sinclair argues Labour's policy announcements on Corporation Tax and energy prices would be economically damaging for Britain.
ED MILIBAND made two big new pledges in his speech yesterday: lower business rates for small businesses, paid for by higher corporation tax on larger firms; and a freeze in energy prices for 20 months from the date of the next election. Economic reality would quickly bite for any government that tried to introduce either policy.
There is nothing wrong with cutting business rates. Lower rates would be a relief for many – particularly small firms and retailers. They often effectively pay half as much again on top of rent. But higher corporation tax rates for larger firms would not raise government revenue, except maybe in the short term. Just as firms in competitive markets cannot increase profits by charging higher prices, governments cannot just hike taxes and expect more revenue in return. Higher corporation tax will drive away investment and mean fewer jobs, lower wages and – in short order – less revenue for the state.