Company taxes
Labour plans to raise £48.6bn to pay for extra spending. It says estimates of extra revenues are conservative and take into account that businesses and individuals will change their behaviour when confronted by higher taxes. It plans to raise an extra £19.4bn a year from corporation tax by raising the headline rate from 21% to 26%. This is two percentage points below the 2010 rate inherited by the coalition government.
Analysis: Labour plans to balance the books with a near-doubling of tax receipts from Britain’s businesses. The Treasury’s most recent analysis of corporation tax payments show it steadily rising in the years from 2012-13 to 2015-16 to £44.4bn, despite steep declines in revenues from North Sea oil. In each year, industrial and commercial firms have paid more. A bounce back in the profitability of banks and insurance companies across the City has also boosted tax receipts.
Low tax-free market advocates argue that higher tax receipts are a result of cuts in the headline corporation tax rate, which has encouraged firms to expand their activities and declare more of their profits in the UK.
Water industry nationalisation
Labour say water bills have risen 40% since privatisation by Margaret Thatcher in 1989. Labour’s manifesto promises to “replace our dysfunctional water system with a network of regional publicly owned water companies”. The party claims this could reduce household bills by £100 a year.
Analysis: Ofwat says the regulatory capital value of the water companies in England and Wales stands at £66bn, excluding debt or pension liabilities. The cost of taking them back into public ownership is not included in the manifesto costings as it would be funded through capital borrowing. John McDonnell said on Tuesday the process could either be through outright purchase or an exchange of shares in water companies for bonds. Senior Welsh Labour figures immediately suggested Welsh Water’s not-for-profit structure might be a better model.
