Conservatives closing the gap on reform

Actually, let me be a bit clearer: rather than assuming you'll draw sensible conclusions.

You can't tax turnover. That's batshit.

business rates should be linked to turnover

So you think there won't be any negative consequences to imposing high taxes on a company which provides lots of employment, and makes only a small amount of profit?

OK.

I would argue that they are possible under a liberal democracy, but only after the country has run out of money and is unable to borrow any more. Then the IMF (or if Eurozone, ECB) step in with a bail out and impose radical structural reforms. Look at what happened in Greece - public sector pensions, pay etc slashed to get the finances back on to a sound footing.
I can envisage similar happening here if the lunatic fringes are elected. And I do not see how Reform will get in without offering to continue existing benefits packages.

A lot of these franchises don't actually post profits, they make huge losses. It's the irony of modern capitalism that many of these companies don't make any money.... share holders value is based on thin air ...the fact the company is growing and had a huge income.

Amazon is slightly different, they reinvest but like all reinvestment it's not taxable.

I personally think business rates should be linked to turnover.

Interesting thanks, I had wondered about those lines on tax for Starbucks and Amazon but not looked it up

Starbucks paid no corporation tax in the UK in 2024. They posted a loss, despite £500m sales, which people complained was artificial. In particular, the last £5million was swallowed up in a £40million licence payment to a subsidiary overseas (leading to a £35million loss). Remember that sales aren't profit - most of the revenue is eaten up in costs like employing staff, running the stores, buying the food. So any tax shortfall would be a fraction of the £500million sales, even without any international manipulation. Starbucks do employ approximately 16,000 people and will collect payroll tax on that, as well as paying business rates for their shops.

Amazon is on a totally different scale. They did previously do some things which reduced their rax bill, but have largely changed that behaviour since 2015. Their UK revenue was £29 billion in 2024 (again, remember this is sales not profit). They are a top-10 UK tax payer, who paid £5.8 billion to the UK last year: £1billion direct corporation tax and the rest collected on the employment they provide for 7500 people and VAT.

More broadly, there are a few different ways in which global companies reduce their UK tax bill.

1.Using subsidiaries abroad to funnel part of their profit to countries that charge companies less tax.

Eg Starbucks have a subsidiary in Lausanne Switzerland which buys green coffee beans from Kenya, roasts them, then sells them to subsidiaries in the UK and other countries. It's sure that the corporation tax rate of 14% there - compared to 25% in the UK - will influence their choice on where to have that factory, and that's normal and OK. We compete with other countries for business investment. The bit that's questionable is that they're accused of overcharging the other subsidiaries (eg the UK) for the beans. That reduces the profit - from UK sales - of the UK subsidiary (where corporation tax is charged at 25%) and increases the profit of the Swiss subsidiary (where corporation tax is charged at 14%). And unfortunately means that corporation tax benefits Switzerland rather than the UK. It's perfectly legal - you can't impose restrictions on a company's bean-buying choices. But it's unfortunate for the UK. It's one of the reasons the Conservatives argue for reducing corporation tax: to bring business and investment to the UK. It has been shown again and again that increasing tax rates above a certain point (all kinds of taxes) decreases the actual tax revenue.

Amazon used to funnel sales through it's Luxembourg subsidiary Amazon EU Sarl... and then also did some other manipulation within Luxembourg around licensing which meant that even Luxembourg took barely any corporation tax. They changed their use of international structures in 2015. Amazon paid £1 billion in UK corporation tax last year.

2.Tax relief on capital investment. In order to encourage investment in the UK, the government allows companies to deduct 100% of the cost of most new plant and machinery from their taxable profits in the first year, providing immediate tax relief on the full investment amount. This does decrease the corporation tax revenue, but it's positive for the UK: providing more jobs and revenue in the future.

For a short time (April 1, 2021, to March 31, 2023) there was even a Super-deduction which took the relief up to 130% - ie we were actually paying businesses to invest, rather than just permitting them to fully re-invest their profits. That was designed to stimulate business investment and aid economic recovery following the COVID-19 pandemic, and has now ended.

Amazon are planning to invest £40billion in the UK over the next 3 years. That will reduce their corporation tax payments - but is very much to the UK's benefit.

It's not just the online shopping and warehouses. Amazon are one of the hyperscalars providing cloud computing services: used by thousands of UK companies, including many of the fastest growing ones and almost all unicorns (most successful privately owned startups), as well as 35 public authorities. Their offering includes AI services which are starting to be used more widely in business, and I think everyone is hoping will turn around the low UK productivity. We really want them investing here!

Yeah apart from none of that was actually written by him, first appeared in the 1950s.

Which makes sense, what democracies existed in the 1700s? let alone in ancient Greece or Rome.

Firstly stopping the pension triple lock would be electoral suicide for any party looking to get elected because of how much weight the pensioner vote has. Sure you could have it as a policy but you will forever be just a candidate rather than an elected politician.

Increasing some taxes on businesses to pay for tax cuts on other businesses is simply shuffling the deck chairs and would have minimal economic growth impact.

Unfortunately as Tytler points out the policy changes required to create sustainable economic growth will involve policies that simply aren't possible under a liberal democracy.

@Pinkponyclub3
@fairyring25

A far more eloquent and intellectual summary (than my rather wordy and clumsy post!) was given by Alexander Tyler in the late 1700's:

"A democracy cannot exist as a permanent form of government. It can only exist until the voters discover that they can vote themselves largesse from the public treasury. From that moment on, the majority always votes for the candidates promising the most benefits from the public treasury with the result that a democracy always collapses over loose fiscal policy"

@1dayatatime
Thanks for your explanation. It is helpful to understand how spending can't grow an economy if you also have higher taxes.
So the problem for Rachel Reeves is that her hands are tied as she ideally needs to decrease spending but Labour voters won't support this.
She has also chosen to tax in the wrong way by increasing employer NI.
Do you think she could have raised capital gains tax instead (but not on the investment part)? Reform are suggesting reducing business rates on small businesses-perhaps this could work but this has to be funded so could there be gradual increase in VAT on businesses so there isn't a cliff edge at £90,000 and to recoup the revenue lost from decreasing in business rates.
She could have reached a compromise with her back-benchers on child benefits by having child benefits decrease after the first two children-taking into account economies of scale. She could have got rid of the triple-lock pension.

I generally loathe the Conservatives as they are now, although I always used to vote for them.
However, I think there may still be a few decent people amongst them but definitely NOT in REFORM.
Will I vote Conservative to keep REFORM out? If i knew it would maybe but if not then not only would Refrom get in but I would have to live with the fact that I voted Consevative

Incredibly hard thing to witness especially when it's your parent. I've done some heating work in a dementia nursing facility and I have to say it was pretty horrible to see.

The government is working on a bill to allow people to call the end when it's close but I'm not convinced it would be of any use in that situation.

I've witnessed my dad die of cancer, my father in law and my partner has just come threw her cancer battle. The NHS has been there throughout.

I long for the day when there's a cure for these cruel diseases. We spend so much effort thinking of ways to build bigger and more destructive weapons but healthcare seems to be deemed too expensive.

I was just wondering about the posts about Labour getting more people onto benefits. I think it was mentioned by @Snowonground
I do know that Universal Credit claims are up however it isn’t a massive amount when you take in the managed migration numbers from legacy benefits. IRESA was the last part of the migration to roll out and that is still ongoing. I think since July 2024 750,000 have moved over to universal credit and by the very nature of that benefit those people will not be required to work. That isn’t labours fault whether you vote for them or not. UC and the rollout was under the previous Government.

There are basically three levers that a Government can pull on to try and grow the economy:
Taxation
Goverment Spending
Government Debt
There is a fourth lever regarding regulation which is more of a political stance rather than economic.

Simplistically if you cut tax you incentivise both businesses and workers to grow as they get to keep more of their income. If you increase taxes then you disincentivise both businesses and workers and the economy shrinks.

Government spending- on paper if the Government increases spending then the economy will grow. However the crucial part is where is the money coming from for increased Government spending. If it is higher taxes then the growth from Government spending will be cancelled out by the contraction from higher taxes. And in reality this will be negative as businesses and individuals are far more efficient and productive with their spending than the Government is.

Government debt - increasing debt to fund Government spending produces a boost to the economy in the short term but the debt and the interest acts as a drag on the economy in the long term.
Given the four to five year term of Governments there is a huge temptation to fund increased spending through debt (and thereby boost political popularity) in the short term and then leave the long term debt problem for the next Government. This is where we currently are due to increases in debt by both the previous Conservative Government (with a big chunk of £500 billion on Covid) and also by the Blair / Brown Labour Government.

So what can be done?
Increasing debt is no longer an option (as Liz Truss found out the hard way).
Increasing taxation will slow the economy as Reeves and her NI increase and fiscal drag has found out.
Cutting spending is economically the only way out to fund tax cuts to grow the economy. However politically this is massively unpopular as Reeves and her back bench rebellions has found out.

So the current Labour policy is to cut spending enough to keep Bond holders happy (owners of Government debt) but not too much to upset her back benchers. And to increase taxes enough to cover extra spending but only so that it slows the economy rather than tanks it.
And increase spending to keep the back benchers happy.

In short Keynesian economics is no longer relevant and simply doesn't work given high levels of debt. Economically and to actually grow the economy long term (will cause a contraction in the short term) the solution is to cut Government spending. Politically the solution is to tinker around the edges and continue with the slow managed economic decline.

@Badbadbunny
So in your opinion, what is the best solution for economic growth and reducing the deficit?

This is so sad I’m sorry to hear it, I agree none of us want this.

There is logic behind the low tax/high spend philosophy. Lower taxes incentivise people to work more, invest more, etc., and of course, lower business taxes encourages business to move their head offices and production to the UK as we're effectively in competition with other countries. That's why so many businesses relocated to Ireland and of course why tax havens exist such as Isle of Man, Panama, etc.

It's well accepted that tax revenue increased from higher earners when the highest income tax rate fell from 50% to 45% which is a good example.

You can't "tax your way" out of debt just like you can't spend your way out of poverty as an individual. It's ALL a balance of encouraging wealth creation and controlling public spending with finding the optimum balance for growth.

Having said all that, I'm not convinced that Reform will have the right balance, just as Labour don't, the Tories didn't, etc. Unfortunately party politics gets in the way of doing what's right for the country every single time.

Yep. Mn tends to focus on the spending, the easy part. Borrow and spend. It’s much harder to incentivise. The question should be how will you get the money

It’s easy and popular to spend money.

It’s a lot harder to govern the country. It requires making choices and ignoring the bleating from single issue pressure groups, and doing boring stuff

It’s a lot harder to make money. It means incentivising what’s effective and not pandering to people who have lots of justifications for why they don’t create any value.

The conservatives seem to be the only party at the moment that is putting forward policies that will both control immigration and our finances. Two things, which I think are very important.
Labour want to just spend money-when we have one of the highest budget deficits ever. I agree with both the conservative and reform on making the criteria stricter for those receiving benefits as people should be encouraged to work where possible.
Reform want to control immigration but they also want to spend a lot and tax very little, which doesn't make sense when we have a huge deficit.