JOHN Denham, the Labour Shadow Secretary of State for Business Innovation and Skills attacked the UK government for lacking a tax policy to boost the economy.

In his first keynote speech on business and growth at the Smith Institute, Denham predicted that 2011 would feel like a tough year for families and business up and down the country. The year which had started with a tax rise, compounded already significant price rises. Unemployment was forecast to remain high as a result of the Government’s decision to go too far and too fast on the deficit. He also clarified that it was the global banking crisis, the massive fall in tax receipts, the costs of rising unemployment and the need to stimulate the economy which had created the deficit, not Labour’s spending.

While the government had broken its promises on VAT, forcing business to raise prices again, it had given an effective tax cut to the banks, which caused the financial crisis in the first place. David Cameron had officially abandoned all attempts to restrain banker’s bonuses and the Tory government had reduced employment protection for millions of largely lower paid employees. The government was helpless and could only exhort banks to lend more to small businesses.According to the Labour party, bankers’ bonus tax should be extended for one more year so that the Government could invest the money in the new jobs and growth needed by British business.

The Tory government’s lack of understanding on the crucial role of public policy had lead to wrong choices for growth and a failure to deliver on some key policies. There was no progress on increased bank lending but the government had decided to cut taxes on banks at the same time as banks were keeping credit tight. The promised Green Investment Bank had yet to take any substantive form. The so-called department for growth had suffered bigger budget cuts than average. Business Development Grants had been ended.  As the Government had chosen not to raise fair additional taxation from the banks, it had spurned the chance to invest in viable projects which could attract private investment, boost growth and create jobs. On critical infrastructure, the development of universal broadband had been delayed and it’s financing and implementation left unclear.

There was as yet no coherent approach to the use of tax policy to support business growth. The government needed to curb the excesses of the financial sector that had led to the problems, restructure the economy and make spending cuts to halve the deficit by the end of the current Parliament.