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Tory rebels and Labour ready to block 25% corporation tax rise

MPs could vote down plans to increase corporation tax from 19 per cent to 25 per cent amid opposition from Tory rebels and Labour, a senior minister has said.

Rishi Sunak is expected to use his budget next week to announce a “pathway” to increase corporation tax over the course of the current parliament. It had been thought that he was looking to raise it to 23 per cent.

However, The Times are reporting that officials are considering going as high as 25 per cent. Sunak’s US counterpart, Janet Yellen, said recently that corporation tax in the US might rise from 21 per cent to 28 per cent. This would mean that the UK could still claim to have the lowest level of corporation tax in the G7 group of developed nations. The first increase is likely to be in the autumn budget, with subsequent rises.

However, there is significant opposition to the move among Tory backbenchers and in cabinet. Mark Spencer, the chief whip, has told Tory MPs that the government will consider any revolt over the budget equivalent to a vote of confidence against the prime minister. It raises the prospect of Tory MPs being stripped of the whip if they rebel. David Davis, a former Brexit secretary, has said that he will vote against the budget if there are significant tax rises.

Sir Keir Starmer, the Labour leader, said that there should be no tax rises as Britain emerges from the pandemic.

A senior minister said: “We shouldn’t be raising corporation tax at a time when we are trying to attract foreign investment as we emerge from the pandemic. We want to bring foreign companies into the UK.”

Increasing corporation tax would end the UK’s 47-year downward trend in the main rate. Each 1 per cent increase would raise about £3 billion. The chancellor wants to raise corporation tax because it is considered one of the few “genuine revenue raisers” left for the government.

Starmer said at prime minister’s questions yesterday: “Turning to next week’s budget, now I don’t expect the prime minister to pre-empt what’s in the budget. But can the prime minister at least agree with me today that now is not the time for tax rises for families and for businesses?”

Johnson responded: “The budget is happening next week, it’s not a date that is concealed from [Starmer], he knows when it is . . . but it’s preposterous for him to talk about tax rises when he stood on a manifesto only a year ago, little over a year ago, to put up taxes by the biggest amount in the history of this country.

“That is the way Labour behave and it’s thanks to prudent fiscal management by this government that we’ve been able to fight this pandemic in the way that we have.”

Starmer said: “This is another PMQs with yet again no answers. Next week’s budget is a chance to choose a different path. To build a stronger future, to protect families, to give our key workers the pay rise they deserve and to back British businesses by supporting 100,000 new start-ups.”

Johnson replied: “If he’ll only wait until next week I think he’ll find that we’ll do far more than that paltry agenda that he set out, far more than that . . . we are going to get on with our agenda, cautious but irreversibly taking this country forward on a one-way road to freedom.”

Sunak is not expected to raise fuel duty following pressure from Tory MPs.

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Tory rebels and Labour ready to block 25% corporation tax rise

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