Ed Balls speaks at the CBI conference in London last year. Photograph: Getty Images.
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Balls seeks to reassure business by pledging to maintain low rate of corporation tax

Shadow chancellor commits Labour to retaining "the most competitive corporation tax rate in the G7".

For months, Ed Balls has been pushing for Labour to adopt a more unambiguously pro-business tone, demonstrating that it has a plan to create wealth, not just to distribute it more fairly. In his speech at the London Business School tomorrow, the shadow chancellor will make the most striking move yet to reassure industry by pledging to maintain "the most competitive rate of corporation tax in the G7".

While Labour remains committed to cancelling George Osborne's planned reduction of the headline rate from 21 per cent to 20 per cent (in order to fund a cut in business rates for small and medium firms), the promise will reassure big business that this isn't the start of a series of hikes (although it's worth noting that the next lowest rate in the G7 is Canada's 26.5 per cent, so Balls has soom room for maneoeuvre). But expect it to dismay those on the left who already believe that Ed Miliband has compromised too much.

Strikingly, while Miliband has repeatedly distanced himself from New Labour, Balls will remind his audience that it was the last government that started the trend of successive corporation tax cuts (reducing the main rate from 33 per cent in 1997 to 28 per cent in 2007). The former City minister has been more concerned than most by Labour's fractious relationship with industry, recently telling the FT: "I don’t think Labour will win the next election as an anti-business party."

He will say tomorrow:

Our business tax system must be competitive, promote long-term investment and innovation, and be simpler, predictable and fair. The last Labour Government left Britain with the most competitive rate of corporation tax in the G7 and we are committed to maintaining that position.

But unlike George Osborne we also recognise that companies are just as concerned about other elements of the business tax regime, such as capital allowances and business rates. That is why, having started and supported successive cuts in corporation tax over the last 15 years, we do not think the right priority is a further cut next year. We will, instead, cut and then freeze business rates for more than 1.5 million business properties. When resources are tight this is a tough choice to allow us to support more businesses and keep our overall business tax regime competitive.

The purpose of a competitive tax system must be that companies view Britain as a great place to do business, not simply a cheap place to shift their profits. So Labour’s approach will be to develop a business tax system that promotes long-term investment, supports enterprise and innovation, provides a stable and predictable policy framework for business, and which is founded on fairness. With this approach Britain can compete in a race to the top, with a highly skilled, productive workforce directly benefiting from sustainable economic growth.

Balls will also announce that Labour is examining the case for introducing an allowance for corporate equity "to redress the systemic bias in favour of debt finance", and structural changes to the tax system to incentivise long-term investment. He will float the option of a lower rate of capital gains tax for long-term investors, as recommended by George Cox's report on short-termism.

"This could complement an Allowance for Corporate Equity, by making long-term investment attractive to the investor as well as to the recipient of funding. Labour is consulting with industry on the potential impact of these and other recommendations of the Cox Review and how they could be delivered in a revenue-neutral way," he will say.

Balls's words have been warmly received by the CBI, whose deputy director general Katja Hall said: "A competitive business tax system is crucial for future growth – and that includes an attractive headline rate of corporation tax.

"Tax and other measures to boost business investment, including capital allowances and equity finance will help firms of all sizes harness their potential, particularly medium-sized companies and those in the manufacturing sector. It is also important that the tax system encourages and rewards a long-term investment focus.

"The best way of ensuring the recovery benefits all is through a thriving private sector and businesses of all sizes will deliver this growth."

Whether this change of tone from Labour is enough to win hostile FTSE 100 chiefs round is doubtful. But after this week it will be harder for the Tories to argue that Labour lacks a "long-term economic plan" (a term appropriated by Balls in a recent New Statesman piece). On Tuesday, Miliband will launch Andrew Adonis's growth report in Leeds, outlining the party's plans to create a more balanced and productive economy. Then on Thursday, Miliband and Balls will appear alongside Lord Sainsbury, one of Labour's few prominent business supporters, at the Science Museum at Policy Network's Inclusive Prosperity conference (which will also feature Chuka Umunna, Peter Mandelson and a host of business leaders).

But in his speech tomorrow, Balls will also affirm the defining message of Miliband's leadership: that Labour is anti-"business-as-usual". He will warn that public support for an open market economy will only be maintained if Labour ensures that markets like energy and banking "work better for consumers and businesses alike". It's a message that the City would be wise to heed.

George Eaton is political editor of the New Statesman.

Photo: Getty
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Something is missing from the Brexit debate

Inside Westminster, few seem to have noticed or care about the biggest question mark in the Brexit talks. 

What do we know about the government’s Brexit strategy that we didn’t before? Not much, to be honest.

Theresa May has now said explicitly what her red lines on European law and free movement of labour said implicitly: that Britain is leaving the single market. She hasn’t ruled out continuing payments from Britain to Brussels, but she has said that they won’t be “vast”. (Much of the detail of Britain’s final arrangement is going to depend on what exactly “vast” means.)  We know that security co-operation will, as expected, continue after Brexit.

What is new? It’s Theresa May’s threat to the EU27 that Britain will walk away from a bad deal and exit without one that dominates the British newspapers.

“It's May Way or the Highway” quips City AM“No deal is better than a bad deal” is the Telegraph’s splash, “Give us a deal… or we walk” is the Mirror’s. The Guardian opts for “May’s Brexit threat to Europe”,  and “May to EU: give us fair deal or you’ll be crushed” is the Times’ splash.

The Mail decides to turn the jingoism up to 11 with “Steel of the new Iron Lady” and a cartoon of Theresa May on the white cliffs of Dover stamping on an EU flag. No, really.  The FT goes for the more sedate approach: “May eases Brexit fears but warns UK will walk away from 'bad deal’” is their splash.

There’s a lot to unpack here. The government is coming under fire for David Davis’ remark that even if Parliament rejects the Brexit deal, we will leave anyway. But as far as the Article 50 process is concerned, that is how it works. You either take the deal that emerges from the Article 50 process or have a disorderly exit. There is no process within exiting the European Union for a do-over.  

The government’s threat to Brussels makes sense from a negotiating perspective. It helps the United Kingdom get a better deal if the EU is convinced that the government is willing to suffer damage if the deal isn’t to its liking. But the risk is that the damage is seen as so asymmetric – and while the direct risk for the EU27 is bad, the knock-on effects for the UK are worse – that the threat looks like a bad bluff. Although European leaders have welcomed the greater clarity, Michel Barnier, the lead negotiator, has reiterated that their order of priority is to settle the terms of divorce first, agree a transition and move to a wider deal after that, rather than the trade deal with a phased transition that May favours.

That the frontpage of the Irish edition of the Daily Mail says “May is wrong, any deal is better than no deal” should give you an idea of how far the “do what I want or I shoot myself” approach is going to take the UK with the EU27. Even a centre-right newspaper in Britain's closest ally isn't buying that Britain will really walk away from a bad deal. 

Speaking of the Irish papers, there’s a big element to yesterday’s speech that has eluded the British ones: May’s de facto abandonment of the customs union and what that means for the border between the North and the South. “May’s speech indicates Border customs controls likely to return” is the Irish Times’ splash, “Brexit open border plan “an illusion”” is the Irish Independent’s, while “Fears for jobs as ‘hard Brexit’ looms” is the Irish Examiner’s.

There is widespread agreement in Westminster, on both sides of the Irish border and in the European Union that no-one wants a return to the borders of the past. The appetite to find a solution is high on all sides. But as one diplomat reflected to me recently, just because everyone wants to find a solution, doesn’t mean there is one to be found. 

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.