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.

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The tale of Battersea power station shows how affordable housing is lost

Initially, the developers promised 636 affordable homes. Now, they have reduced the number to 386. 

It’s the most predictable trick in the big book of property development. A developer signs an agreement with a local council promising to provide a barely acceptable level of barely affordable housing, then slashes these commitments at the first, second and third signs of trouble. It’s happened all over the country, from Hastings to Cumbria. But it happens most often in London, and most recently of all at Battersea power station, the Thames landmark and long-time London ruin which I wrote about in my 2016 book, Up In Smoke: The Failed Dreams of Battersea Power Station. For decades, the power station was one of London’s most popular buildings but now it represents some of the most depressing aspects of the capital’s attempts at regeneration. Almost in shame, the building itself has started to disappear from view behind a curtain of ugly gold-and-glass apartments aimed squarely at the international rich. The Battersea power station development is costing around £9bn. There will be around 4,200 flats, an office for Apple and a new Tube station. But only 386 of the new flats will be considered affordable

What makes the Battersea power station development worse is the developer’s argument for why there are so few affordable homes, which runs something like this. The bottom is falling out of the luxury homes market because too many are being built, which means developers can no longer afford to build the sort of homes that people actually want. It’s yet another sign of the failure of the housing market to provide what is most needed. But it also highlights the delusion of politicians who still seem to believe that property developers are going to provide the answers to one of the most pressing problems in politics.

A Malaysian consortium acquired the power station in 2012 and initially promised to build 517 affordable units, which then rose to 636. This was pretty meagre, but with four developers having already failed to develop the site, it was enough to satisfy Wandsworth council. By the time I wrote Up In Smoke, this had been reduced back to 565 units – around 15 per cent of the total number of new flats. Now the developers want to build only 386 affordable homes – around 9 per cent of the final residential offering, which includes expensive flats bought by the likes of Sting and Bear Grylls. 

The developers say this is because of escalating costs and the technical challenges of restoring the power station – but it’s also the case that the entire Nine Elms area between Battersea and Vauxhall is experiencing a glut of similar property, which is driving down prices. They want to focus instead on paying for the new Northern Line extension that joins the power station to Kennington. The slashing of affordable housing can be done without need for a new planning application or public consultation by using a “deed of variation”. It also means Mayor Sadiq Khan can’t do much more than write to Wandsworth urging the council to reject the new scheme. There’s little chance of that. Conservative Wandsworth has been committed to a developer-led solution to the power station for three decades and in that time has perfected the art of rolling over, despite several excruciating, and occasionally hilarious, disappointments.

The Battersea power station situation also highlights the sophistry developers will use to excuse any decision. When I interviewed Rob Tincknell, the developer’s chief executive, in 2014, he boasted it was the developer’s commitment to paying for the Northern Line extension (NLE) that was allowing the already limited amount of affordable housing to be built in the first place. Without the NLE, he insisted, they would never be able to build this number of affordable units. “The important point to note is that the NLE project allows the development density in the district of Nine Elms to nearly double,” he said. “Therefore, without the NLE the density at Battersea would be about half and even if there was a higher level of affordable, say 30 per cent, it would be a percentage of a lower figure and therefore the city wouldn’t get any more affordable than they do now.”

Now the argument is reversed. Because the developer has to pay for the transport infrastructure, they can’t afford to build as much affordable housing. Smart hey?

It’s not entirely hopeless. Wandsworth may yet reject the plan, while the developers say they hope to restore the missing 250 units at the end of the build.

But I wouldn’t hold your breath.

This is a version of a blog post which originally appeared here.

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