Tories plan revamp of bankruptcy laws

LONDON (Reuters) - The Conservatives pledged on Tuesday to revamp bankruptcy laws to give companies more breathing space in an economic downturn, one a series of measures in a new economic recovery plan.

While Britain is unlikely to have a general election until 2010, the Conservatives have a huge lead in the polls over the Labour Party and analysts are watching their policy statements closely.

Conservative leader David Cameron said the party was consulting on adopting U.S.-style Chapter 11 insolvency rules which allow firms more time to restructure in the face of the credit crunch while continuing to operate.

He reiterated a pledge to cut corporation tax to 25 percent from 28 percent now and reverse an increase in small business taxes which will push the rate to 22 percent from 19 percent.

In his speech to business lobby group the Confederation of British Industry, Cameron detailed policies covering job security, financial security, family finances, government spending and how to boost economic growth.

"We want to make sure sound companies don't go into liquidation unnecessarily," Cameron told the CBI.

"We all know what liquidation normally means -- closure. That isn't good for the companies, many of which are actually fundamentally sound. This isn't good for the banks, who lend them money. And it's not good for employees, who face being laid off," he said.

Industry experts have warned that corporate insolvencies could jump this year as cash-strapped banks curtail their lending and call in loans from vulnerable companies.

The government said it already introduced legislation in 2003 to help companies going through financial difficulty survive. It said that Chapter 11 in the United States is a more expensive, court-based system of administration.