Tax cut promised for millions of firms struggling after Covid if Labour wins election

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Shadow chancellor Rachel Reeves said Labour will cut business tax for small firms as well as crack down on tax breaks for the wealthy to help ordinary workers

Millions of small firms will face an immediate cut in business rates if Labour takes power at the next election – before they are scrapped completely a year later.

Shadow chancellor Rachel Reeves will announce plans to shift the burden of business taxes from the high street, struggling in the wake of the pandemic, onto larger and online companies.

In an interview with the Mirror, she said: “It’s unfair competition and that’s why we want to reform that business rate system.

“It would be a levelling of the playing field so big business pays at least a global minimum on corporation tax and high street and small businesses and start ups see their burden of tax fall.”

The plan would be paid for by a one-off Digital Services Tax of 12% for the first year, and a global minimum rate of corporation tax after that.

Labour would also crack down on tax breaks for the wealthy, worth billions of pounds, to help fund policies for ordinary workers.

Boris Johnson is already under pressure to drop his plans to cut Universal Credit from next month and not to hike National Insurance next year to clear the NHS backlog.

The Government currently spends over £170bn a year on tax breaks, more than it spends on the health service, with many of them wasteful and inefficient.

Ms Reeves said she would prioritise scrapping the 28% rate on bonuses for private equity bosses, raising £440m a year.

“The Government just needs to not go ahead with the things they’re planning. Even if they got a pay-rise money is being taken out of their pockets and purses,” she told the Mirror.

“There’s plenty of people the Government could tax – but they never go to those people, they just go to ordinary working people.”

Key workers including a supermarket worker, train driver and special needs teacher will her watch her conference speech today [MON] from the front row.

“They just want a Government on the side or ordinary people doing ordinary jobs who just want a bit more recognition and reward,” she said.

“Those people who do jobs without which the rest of society wouldn’t be able to function. They’re the foundations of our society.

“They’re too often hidden from sight and under appreciated and undervalued, but they’re absolutely essential. They keep the economy going.”

Ms Reeves accused the PM of being “incredibly complacent” about the difficult winter ahead for families struggling to pay their bills.

She suggested that many of the problems – driver shortages, empty supermarket shelves and hospitality businesses struggling to find staff – were as a result of Brexit.

“This Government were the Brexit cheerleaders-in-chief,” she said.

“We’ve had five years since the electorate voted to leave the EU and the Government has no plan, they’ve lurched from one crisis to another with no plan of how to fix it.”

The former Bank of England economist set out Labour’s new fiscal rules at the weekend in an attempt to boost the party’s battered reputation for economic credibility.

She refused to say whether Labour would back pay increases for public sector workers until she had seen the books at next month’s Budget.

However, she said that the party had “very much objected” to the 1% payrise for NHS staff announced by Rishi Sunak and would look at the “envelope” of money available.

The Labour MP batted away claims of splits over income tax after Keir Starmer claimed that “nothing was off the table” – just hours after she had said there were no plans to increase it.

“We are very much on the same page,” she said.

Business groups welcomed Labour’s plans to replace business rates with a fairer system.

The Federation of Small Businesses’s Mike Cherry 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.”

CBI director general Tony Danker added: “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.”