Slashing business taxes in an attempt to boost the economy is a “failed race to the bottom” that does not work, according to a new report.
The warning from the IPPR think tank comes as Kwasi Kwarteng prepares to scrap the planned increase corporation tax.
The new chancellor will make the announcement in a mini-budget on Friday which will also see him cancel the rise in national insurance contributions.
Kwarteng and Truss believe slashing taxes is essential to growing the economy.
But the IPPR report reveals the UK had the lowest rate of business investment of any major economy in 2019, despite also having the lowest corporation tax rate for the previous 20 years.
In a further blow, in 2020 the UK was ranked 28 out of 31 members of the OECD group of major economies for business investment.
The IPPR said: “The evidence of the last 15 years in the UK is that repeated cuts to the corporation tax rate – from 30 per cent in 2007 to 19 per cent since 2017 – have not led to higher private investment or growth.”
Corporation tax - which companies pay on their profits - in the UK had been due to go up to 25 per cent from next April.
But Kwarteng will announce he is cancelling that increase, which was brought in by his predecessor, Rishi Sunak.
Dr George Dibb, head of the IPPR’s centre for economic justice, said: “Slashing corporation tax is just a continuation of a failed race to the bottom that hasn’t delivered for the UK economy.
“Tax cuts are not a magic bullet to increase investment and growth - in fact, despite having some of the lowest levels of corporate taxation, business investment in the UK is the lowest in the G7. We’re not just falling behind the largest economies either, the UK is consistently in the worst performers in the OECD club of 38 developed economies.
“If the government were serious about boosting investment, it would be listening to businesses who want a serious economic strategy to support growth, boost innovation, and increase our low productivity. Instead, it thinks it can cut tax and deregulate its way to growth, which has failed before.”