Ed Balls is to launch a bid to bolster Labour's credibility with business by promising to keep a low rate of corporation tax and attract long-term investors to Britain, as he brushed off criticism from the policy chief Jon Cruddas that a "profound dead hand" within the party is blocking bold reforms.
The shadow chancellor's pledge to maintain UK corporation tax as the lowest in the G7 – anything below 26.5% – is one of a number of business-focused policy announcements this week for Labour. In a speech to the London School of Business on Monday, Balls will also reveal he is looking at two new tax breaks to encourage companies to invest in the UK for the long term.
Labour will be "pro-business but not business as usual", he will say, arguing that the party's plan to crack down on energy companies and banks is ultimately good for companies as it will help restore faith in an open-market economy.
On Tuesday Miliband will back plans to encourage growth proposed by the former transport secretary Lord Adonis, which include handing over £30bn from Whitehall to local enterprise partnerships and making sure a quarter of government contracts go to small companies. He will then address company leaders on Thursday at a Policy Network event alongside Balls, although Labour sources stressed the leader's continuing commitment to tackling big corporate vested interests, and denied there was a concerted attempt to woo the business community.
On Sunday night, the CBI reacted positively to the proposals put forward by Balls, saying a competitive business tax system is "crucial for future growth", and that boosting long-term investment would "help firms of all sizes harness their potential". Its director-general, John Cridland, has previously been critical of Labour, saying the business community had been left "scratching its head" over a perceived swing to the left, towards "wage controls, price controls, land controls, tax increasing, and dividing large and small companies".
The plans are also likely to address some of the concerns of Lord Mandelson, a former Labour business secretary, who accused Miliband earlier this month of giving out a confused message on business and called for more of "an explanation of how we're going to bring about economic growth".
However, Labour's new policy measures were undermined by reported criticism from Cruddas, the man in charge of the party's policy review, which was taped at a semi-private meeting of the left-leaning Compass pressure group and passed to the Sunday Times.
At the meeting, the shadow cabinet minister complained that radical suggestions put forward by his working groups had been "parked" and replaced with "cynical nuggets of policy to chime with our focus groups and press strategy". A major policy forum is due to be held in July, but Cruddas raised concerns that "interesting ideas" were "not going to emerge" through his process.
In particular, he expressed disappointment that the party was handed the Institute for Public Policy Research (IPPR) thinktank's two-year Condition of Britain report, then chose to emphasise that it would adopt a policy of reforming benefits for 18- to 21-year-olds, which he branded "fairly cynical and punitive".
Some quarters of the left reacted with sympathy to Cruddas, including Andrew Harrop, general secretary of the Fabian Society, who acknowledged that there was a "struggle" within the party between the cautious and the radical. "I do think the Labour party does have a problem of announcing very small policies that they're trying to get a daily headline out of and actually the problem is they don't really capture the public's imagination," he told the BBC.
Senior Labour sources shrugged off the comments, saying they were just how Cruddas expresses himself on most topics. However, Neal Lawson, chairman of Compass, reacted with fury to the secret recording of his group's event, saying it was a violation and diminishing to political culture.
Writing for the Guardian's Comment is free site, he said: "Are there no spaces in which our politicians can test, discuss and get feedback on ideas with their friends and supporters? Are there no places where an audience can ask a question and hope to get a vaguely honest answer? Is nothing private? I've got images of Minority Report running through my mind and the notion of pre-crime. If the politicians think it, should we know it? Shall we bug their minds?"
Steve McCabe, a shadow Labour minister, took to Twitter to ask whether the entire Labour press team were all on leave. "How long are we going to allow Cruddas non-story to run while BBC all but ignores Cameron's EU catastrophe?" he added.
He told the Guardian the BBC and newspapers should not be giving so much air to the story. "That's exactly how policy gets set. People have different ideas, sometimes they are competing, people have different priorities for which ideas should come to the top of the pile. That's exactly how policy is formed in all political parties," he said.
Balls also dismissed the notion of a split within Labour over policy and promised that this week would bring many "big ideas" from Labour including "big devolution, reports on long-term infrastructure spending, a new manufacturing industrial policy, new investment in skills – big changes which, let's be honest, aren't really on George Osborne's agenda."
Insisting the party is united, Balls said: "Jon Cruddas, with me and Ed and others, has been working for months, years on big reforms. They're going to come out in the next few months … I understand Jon Cruddas' frustration about a newspaper headline. We've all been in a situation where a big report or a big speech is reduced down to just one policy."
The shadow chancellor's speech on Monday will pitch Labour's approach to business as one that must be "competitive, promotes long-term investment and innovation, and be simpler, predictable and fair."
He will say Labour would reverse the coalition's proposed cut in corporation tax from 21% to 20% but commit to keeping it lower than any other G7 country. With the next nearest level of G7 corporation tax in Canada at 26.5%, that still leaves Balls with room to raise it by several percentage points but is pitched to reassure investors that the party would not raise it dramatically.
Under one potential reform, Balls will examine the case for introducing an Allowance for Corporate Equity - potentially creating a tax break for equity financing on top of the current one for debt financing. He will also consider a lower rate of capital gains tax for long-term investors.
Balls will also mention tough measures to tackle tax avoidance, including a promise to close the "eurobonds" loophole, which allows companies to shift profits out of the UK and has been estimated to cost up to £500m a year in lost revenues.
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