A future Labour government would cut business rates and reverse the current coalition government's plans to reduce corporation tax to 20% by 2015.
Speaking at the party conference, Labour leader Ed Miliband said the next Labour government will cut business rates in its first year in office, and then freeze them. Miliband said the move would help 1.5m businesses and save them an average of £450 a year, and would be funded by halting planned reductions in the rate of corporation tax.
Miliband said that millions of jobs in the future will come from a large number of small businesses, not a small number of large businesses.
'When you think 15 years ahead, the rate of change and dynamism is so great that most new jobs will be done by companies that don't yet exist. This changes the priorities for government.'
Chris Sanger, EY head of tax policy, said the announcement represented a move 'away from the recent orthodoxy of tax policy'. He said the Labour Party is seeking to address the increasing importance, particularly for smaller businesses, of business rates which have risen to more than 4% of total taxes, coming close to meeting the declining revenues from corporation tax (due to be 5.75% of total taxes by 2017).
'Business rates are generally disliked by businesses, given that they do not flex with profits, and a review of this tax will be welcomed by small and large business alike,' Sanger said.
'The reaction to this policy shift is likely to depend critically on the business concerned. The reducing headline rate of corporation tax rate has been the clarion call of competitiveness for the UK and a key driver behind the "open for business" message. Investors seeing this change now may well be concerned as to whether this represents a fundamental change in policy or a slight shift in priorities,' Sanger pointed out.
In his speech Miliband also announced the next Labour government would pass legislation to force energy companies to cap gas and electricity prices until 2017, saying 'they have been overcharging people for too long', and would introduce a tougher regulatory body for the energy market.
