Rachel Reeves 'astonished' at Tory MPs calling for VAT increase as business rates replacement

Cuts in business rates to help struggling high street stores and a detailed commitment to building Northern Powerhouse Rail should be top of Chancellor Rishi Sunak’s agenda for the Budget, Labour’s Shadow Chancellor Rachel Reeves has suggested.

Keir Starmer and Rachel Reeves at the Labour party conference.

The Leeds West MP said she had been “quite astonished” by calls this week by Conservative MPs, including Yorkshire’s Kevin Hollinrake, for the Government to consider raising VAT as a way of replacing lost revenue from a potential business rates cut.

Labour has instead suggested an alternative plan to increase taxes on internet giants like Amazon – initially involving raising the rate of the Digital Services Tax, which is levied on internet giants like Google and Facebook but is being phased out from 2023 in favour of a global tax system on such firms, from the current two per cent to 12 per cent.

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Ms Reeves said: “It has been a really tough time in the last year in the half for businesses and particularly high street businesses.

“Labour set out at conference how we would freeze business rates next year and extend small business rates relief by asking the online giants to pay more in tax.

“Then we would look to scrap business rates altogether and get a fairer form of property taxation which doesn’t see small businesses and high street businesses taxed so much while some big companies, particularly online companies, are taxed so little.”

“Our proposal is saying the online giants are making unbelievable profits right now and they should be asked to pay more and most of them don’t even pay corporation tax in this country,” she said.

“I think that would be a lot fairer than asking ordinary people to pay more VAT. I found that quite astonishing, to be honest.”

She said that in addition to seeing support for high streets announced in the Budget on Wednesday, she also hopes to action on climate change issues and for the Government to announce a “firm commitment” to the Northern Powerhouse Rail project, which aims to introduce high-speed rail links between northern cities.

“It was first announced seven years ago and it has been reannounced and reannounced,” she said.

“But that hasn’t got anyone from Leeds to Manchester or Liverpool or Hull or Newcastle any quicker than we can currently.”

She said Labour’s other economic policies include ending the charitable status of private schools which exempts them from VAT, as well as higher taxes on private equity firms such as those who have recently purchased Morrisons and Asda.

“It is about choices - everything that Labour says we will do, we need to show how we will pay for it,” she said. “It is different choices compared to those the Government are making.

“Labour knows we need to get our public finances back on track. We do that by taxing fairly and spending wisely. I don’t think the Government do either of those things right now. Labour are unapologetically pro-worker but also unapologetically pro-business.”

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