Boris Johnson scraps controversial corporation tax cut in U-turn following outcry

Prime minister claims he is freeing up £6bn for the NHS and other public services – but move will be seen as bowing to Labour criticism

Rob Merrick
Deputy Political Editor
Monday 18 November 2019 12:10
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Conservative government postpone promised cuts in corporation tax

Boris Johnson has scrapped controversial plans to cut corporation tax, to head off Labour criticism that he is in sway to big businesses.

Addressing the CBI conference, the prime minister claimed the U-turn – leaving the tax at 19 per cent next April, instead of 17 per cent – would free up £6bn to spend on the NHS and other public services.

The move will be seen – despite big Tory poll leads – as a response to Jeremy Corbyn’s attacks on the Conservatives as in hock to big corporations.

Answering questions, Mr Johnson also claimed there was “absolutely no reason” why a UK-EU trade deal would not be in place by the end of 2020, despite experts dismissing the timetable as implausible.

And he refused to comment on the Prince Andrew scandal, saying he would not be “dragged into commentary about matters concerning the royal family”.

The prime minister also pledged to keep Sajid Javid as chancellor if he wins the election – despite clashes between the pair – saying he was a “great guy, he’s doing a fantastic job”.

Corporation tax has tumbled under successive Conservative chancellors – who have usually claimed it increases revenues, by encouraging more companies to invest in the UK.

But Mr Johnson turned that argument on its head, by arguing shelving the latest cut would raise £6bn – significantly, the amount Labour has pledged to spend on the NHS above the Tory proposal.

He argued his was now the “fiscally responsible” compromise position, with Labour pledged to increase corporation tax back to its 2010 level of 26 per cent.

“The alternative is Jeremy Corbyn, who would whack it straight back up to the highest levels in Europe,” the prime minister told the conference.

It received a cautious welcome from Carolyn Fairbairn, the CBI director general, provided it was accompanied by other pro-business measures.

“Postponing further cuts to corporation tax to invest in public services could work for the country if it is backed by further efforts to the costs of doing business and promote growth,” she said.

Mr Johnson has faced increasing criticism from business leaders who tolerated Theresa May’s Brexit deal, because his hard Brexit plan will throw up fresh barriers by diverging from EU rules.

Instead, he sought to woo the CBI with a package of other tax cuts, to employer national insurance contributions (£1,000), research and development (higher tax credits) and another business rates review.

In his speech, Mr Corbyn struck a moderate tone, arguing Labour supported the proposals in the CBI’s own election manifesto and denying his party is anti-business.

He said big businesses would be expected to pay their fair share of tax – and public services brought back into public ownership – but argued this is normal in many parts of Europe.

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