James Moore: Ed Miliband's making a political mistake with his business rate promise

Outlook Ed Miliband's pledge to roll back rises in business rates by reversing the Government's planned cut in corporation tax stands current orthodoxy on its head.

For years governments of all hues have been cutting headline rates of corporation tax. This calls a halt to that in favour of tackling a more regressive form of business taxation.

Business rates exist as a cost with little relation to the ability of firms to pay them. Corporation tax might not be much loved, but it is at least a progressive charge linked to earnings and therefore the ability to pay.

What's more, the change in tack ought, in theory, help small businesses on whose expansion business rates act as a brake. Voters might also find the idea of bashing big businesses to help smaller ones rather compelling.

So why the lack of an unequivocal endorsement from the groups representing the firms that are poised to benefit, such as the Federation of Small Businesses or the British Retail Consortium, whose town-centre based members suffer the iniquities of business rates most of all.

It's because there are numerous flaws in Mr Miliband's logic. While they give him some credit for recognising the trouble with business rates, in stark contrast to the Treasury, his approach is something of a blunt stick that does little to address a host of underlying problems with the charge.

Take the way annual rises are calculated, a particularly sore point. Business-rate increases are linked to RPI inflation, abandoned by government for most purposes in favour of CPI inflation, RPI has, of course, been higher than its cousin for quite some time. Crucially (for businesses) it is also more volatile. Rates' linkage to property (and the rateable values thereof) also results in perverse outcomes.

Then there's hiking corporation tax to pay for the cut. Again, in theory, this isn't a terrible idea.

It's not as if corporation tax in Britain is high. Headline rates are actually lower than in any major developed economy, lower than the average of the Brics (Brazil/Russia/India/China) and lower than the Organisation for Economic Co-operation and Development (OECD) average. British corporation tax would still be highly competitive were a Miliband administration to put this policy into effect.

But promising to increase it now represents particularly poor timing. Britain relies on big, international businesses far more than most of its European competitors to provide employment and changing that will take some time.

In the meantime, if Mr Miliband is serious about addressing the big flaw in the modest economic recovery delivered by the Coalition – the fact that wages continue to lag behind inflation – he needs job creation to tighten the labour market. Promising to kick the businesses that might provide those jobs isn't terribly clever politics. He's cutting off his nose to spite his face.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
News
people
News
A survey carried out by Sainsbury's Finance found 20% of new university students have never washed their own clothes, while 14% cannot even boil an egg
science...and the results are not as pointless as that sounds
News
politicsIs David Cameron trying to prove he's down with the kids?
News
Businessman at desk circa 1950s
news
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea