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Labour sets out plans to support high street firms by taxing online giants

·5-min read
(Stefan Rousseau/PA) (PA Wire)
(Stefan Rousseau/PA) (PA Wire)

The tax system is “stacked” against high street firms, Labour has warned as it set out plans to shift the burden to online giants like Amazon.

Shadow chancellor Rachel Reeves said she would freeze business rates next year if she was in No 11, while also offering a cut for small firms, paid for by hiking digital taxes.

She committed the next Labour government to abolishing business rates, using the proceeds of a global deal on taxing multinational firms.

The tax system is stacked against high street businesses and small businesses

Rachel Reeves

The move comes as Labour seeks to get its conference in Brighton back on track following internal rows over party rules, criticism of Sir Keir Starmer after he ruled out nationalising energy giants and the fallout from Angela Rayner’s attack on the “scum” in Boris Johnson’s Cabinet.

Ms Reeves said: “I want taxes to be fair, efficient and I want them to support our high street businesses. We have got a situation at the moment where, in the first six months of this year, every single day 50 high street businesses were closing.

“Four out of five businesses are saying that if the Government goes ahead with its business rates increase next spring then they will have to consider closing outlets.

“This is not a place that we want to be, people want thriving high streets in all of our communities.

“But at the moment the tax system is stacked against high street businesses and small businesses.”

Labour Party leader Sir Keir Starmer and shadow chancellor Rachel Reeves (Stefan Rousseau/PA) (PA Wire)
Labour Party leader Sir Keir Starmer and shadow chancellor Rachel Reeves (Stefan Rousseau/PA) (PA Wire)

The freeze in business rates in 2022/23, and an increase in the threshold for small business relief from £15,000 to £25,000, would be funded by increasing the digital services tax from 2% to 12%.

Insisting that Labour could be trusted with the public finances, Ms Reeves told BBC Radio 4’s Today programme: “I have set out clear fiscal rules, that we will pay for day-to-day spending with tax receipts and that we will get our debt falling as a share of our national income.

“I will not make a commitment I can’t keep, I will not make promises that I cannot keep.”

She insisted there was no rift with her party leader over tax policy after Sir Keir said “nothing is off the table” when asked about income tax rises.

Ms Reeves told Times Radio: “Keir and I are both very clear, we have no plans to increase income tax and neither of us want to increase income tax, it is not on our agenda.

“The only people who are increasing taxes for working people are the Tories with their jobs tax that comes in next year that hits ordinary working families and struggling businesses.

“That’s not our approach – we would ask those with the broadest shoulders, particularly those who get their incomes not from going out to work but from stocks and shares and buy-to-let properties.”

Ms Reeves has promised to review the system of tax breaks and Labour has already said it will abolish the charitable status given to private schools and close the carried interest loophole for private equity bonuses to raise £440 million.

The fallout continued from Ms Rayner’s Saturday night diatribe against the Tories, with Ms Reeves saying many people shared the deputy leader’s sentiments, although she did not endorse her choice of words.

“I wouldn’t use that language but I think that sentiment is shared by many people who are struggling at the moment, queuing for petrol, who are worried about cuts to Universal Credit next month and worried about increases in taxes next year.”

Business groups welcomed Labour’s proposals on tax.

Mike Cherry national chairman of the Federation of Small Businesses, said: “The shadow chancellor is right to propose concrete reform of a business rates tax which disproportionately burdens the small businesses and sole traders at the heart of local communities.”

Tony Danker, CBI director-general, said: “Change to this outdated system is chronically overdue.

“The Labour Party should be applauded for grasping the nettle and putting forward a pro-growth, pro-investment package of reforms that will reflect our green ambitions, spur the economic recovery, and help level up our regions.”

Meanwhile, shadow work and pensions secretary Jonathan Reynolds will use his speech to highlight the combined impact of the imminent Universal Credit cut, rising energy bills and next April’s hike in national insurance.

Jonathan Reynolds (Yui Mok/PA) (PA Archive)
Jonathan Reynolds (Yui Mok/PA) (PA Archive)

Analysis by Labour indicated that the average working family will be more than £1,700 worse off by April.

A working single parent with two children will lose 5% of their income because of the decision to freeze income tax personal allowances, raise national insurance and cut Universal Credit.

Ahead of his speech, Mr Reynolds said: “It is not too late for the Government to change course, cancel their cut to Universal Credit and back struggling families this winter. Labour would maintain the uplift and replace Universal Credit.”

Conservative Party co-chairman Oliver Dowden dismissed Labour’s plans for the economy.

“Successive Labour leaders have threatened businesses with tax hikes, higher bills and more red tape,” he said.

“Only the Conservatives can be trusted to support our businesses and help our economy thrive as we build back better.”

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