Budget 2021: Keir Starmer backs delay in raising corporation tax

Keir Starmer has signalled that Labour will back plans to increase corporation tax from 2023, reiterating the party’s opposition to immediate tax rises, which has caused a backlash from the left.

He criticised the chancellor, Rishi Sunak, for key omissions from the budget, saying a Labour chancellor would have put NHS investment and social care reform “front and centre”.

Starmer and the shadow chancellor, Anneliese Dodds, had voiced strong opposition to tax rises in the week leading up to the budget, including when pressed on a proposed increase to corporation tax. Dodds later told the Guardian that the party was prepared to back a rise later in the parliament.

Responding to Sunak’s announcement that the tax on company profits would rise from 19% to 25% from 2023, Starmer signalled that the delay was sufficient for the party’s backing.

“The IMF and the OECD have said now isn’t the time for tax rises. We’re in the middle of a once-in-300-year crisis. Our economy is still shut. Our businesses are on life-support,” he said. “So it’s right that corporation tax isn’t rising this year or next. Of course in the long-run corporation tax should go up. The decade-long corporation tax experiment by this government has failed.”

At the last election under Jeremy Corbyn’s leadership, Labour planned to raise corporation tax to 26%, staggered over three years.

The former shadow chancellor John McDonnell said Rishi Sunak “steals my rhetoric but no substance” and said working people would be hit hard by the freeze to the income tax threshold and the cliff-edge cut to the universal credit uplift, which Sunak said would end in the spring.

Labour sources said there were key holes in the budget that the party could exploit, including the absence of a plan for social care reform and the chancellor’s own role in creating the economic crisis.

In the detail of the budget, NHS England core resource spending, including Covid spending, will fall from £147.7bn this year to £139.1bn next year. “How are they going to address backlogs and waiting lists?” a Labour source said.

Starmer said the chancellor was yet again deferring decisions on social care. “We heard nothing about a long-term plan to fix social care. The chancellor may have forgotten about it but the Labour party never will.”

Attacking the government’s Covid response, Starmer said: “The British people will rightly ask: why has Britain suffered a worse economic crisis than any major economy? The answer is staring us in the face. This is the chancellor who bought who blocked a circuit breaker in September, ignoring the science. He told the British people to live with coronavirus and live without fear.

“A few weeks later we were forced into an even longer and more painful lockdown. Whatever the spin the chancellor tries to put on the figures today, they come as a result of his decisions.”

Starmer said the budget offered little to address inequality and help people in left-behind northern towns, and he said his party would extend the £20-a-week universal credit uplift indefinitely until the welfare system could be reformed, as Labour has pledged to do.

“For the chancellor, ‘levelling up’ seems to mean moving some parts of the Treasury to Darlington, creating a few freeports and reannouncing funding,” he said. “That isn’t levelling up, it’s giving up.”