Labour's £800m Tax Break For Small Business

By Jon Craig, Chief Political Correspondent

Ed Miliband will offer an £800m tax break to smaller companies and pledge to make Labour "the party of small business".

The first act of a Labour government, if it wins the next General Election, will be to reverse a hike in small business rates due in April 2015 and to freeze the levy the following year, the party leader will say.

The move - which Labour calculates will be worth an average £450 over two years to 1.5 million businesses, including shops, pubs and hi-tech start-ups, and up to £2,000 for some firms - will be paid for by scrapping the coalition Government's planned cut in corporation tax from 21% to 20%.

In his speech to Labour's conference in Brighton, Mr Miliband will say he wants growth in the UK economy to benefit "hard-working families", including small business owners, and not just the "privileged few".

Borrowing a slogan from Ronald Reagan's successful 1980 bid for  the US presidency, Mr Miliband will say that in 2015 voters should ask themselves: "Am I better off now than I was five years ago?"

He will also risk a backlash from countryside campaigners by launching a "road map" for the construction of a new generation of new towns in England in a bid to solve the housing crisis.

Labour insiders did not identify areas which might come under consideration for new towns, but said Mr Miliband wants to ensure families are given better access to new homes, and communities which want to grow are helped to do so.

While Prime Minister David Cameron and Chancellor George Osborne have been "boasting" of fixing the economy, Mr Miliband will say the proceeds from growth have gone to a minority, as life for ordinary families has been getting harder, thanks to a "cost of living crisis" caused by soaring bills and wages which fail to keep pace with inflation.

"Too many of the jobs we're creating in this country are just too low-paid, too many of the gains in our economy are just scooped up by a privileged few, including those with big bonuses," he will say. "And too often you are left being charged over the odds.

Mr Miliband says he wants growth to benefit "hard-working families"

"They used to say 'a rising tide lifts all boats'. Now the rising tide just seems to lift the yachts."

Mr Cameron has often said his economic policies are designed to help the UK compete in a "global race" for prosperity.

But Mr Miliband will accuse the Conservatives of pursuing a "race to the bottom", in which prosperity for a few is bought at the cost of worsening wages, conditions and workplace rights for the majority of workers.

Labour would instead offer "a race to the top", with support for small firms to become the wealth and job creators of the future.

"You've made the sacrifices. But you've not got the rewards. You were the first one into the recession, but you are the last one out," the Labour leader will say.

"Will the pain be worth it for the gain under this Government? No.

"They aren't going to solve the cost of living crisis. Because for them, it is not an accident of their economic policy, it is their economic policy.

"David Cameron talks about Britain being in a 'global race'. But what he doesn't tell you is that he thinks the only way Britain can win is for you to lose.

"For the lowest wages, the worst terms and conditions and the fewest rights at work - a race to the bottom. The only way we can win is a race to the top."

Mr Miliband will make the announcement at the Labour conference in Brighton

Mr Miliband will say 80,000 big businesses have already benefited to the tune of £6bn in reductions in corporation tax under the coalition Government, while 1.5 million small firms will have seen their business rates rise by an average of almost £2,000 by the end of this Parliament.

Labour's decision to hold business rates at 2014 levels for two years would affect properties and commercial premises with an annual rental value of £50,000 or less. This would mean some franchise-holders operating branches of major multinationals benefiting from the change.

The move would save small firms a total of £250m in 2015/16 and £540m in 2016/17, according to figures from the House of Commons Library.

Halting the 1% cut in corporation tax would raise an estimated £340m in the first year and £785m the next, but Labour insists that any extra money will be passed on in further cuts to business rates and not taken as additional tax revenue for the Treasury.

Explaining his decision to target tax breaks on small firms, Mr Miliband will say: "Most of the jobs of the future are going to be created in a large number of small businesses, not a small number of large businesses. And most of the new jobs that British people will be doing in 15 years time will be in new companies.

"That's why we have to support our small businesses, the vibrant, dynamic businesses that will create wealth in Britain."

He will also caution activists at Brighton that a Labour government would not have funds to lavish on spending hikes.

"We won't be able to win the race to the top by spending money we don't have,"  he will say. "You know and I know that the next Labour government will face tough times, and there's no point in pretending otherwise.

"We have to deal with the deficit and that means we need to win the race to the top in a different way, based on the jobs we create, the businesses we support, the talents we nurture, the wages we earn and the vested interests we take on."

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