British finance minister Rachel Reeves on Monday said she would never have to repeat the tax hikes of her first budget, an attempt to reassure businesses that were caught off-guard by a 25 billion-pound ($31 billion) tax rise.
The Confederation of British Industry said a survey of its members showed 61 per cent viewed Britain as a less attractive place to invest and nearly half intended to cut staff levels or lower pay rises after a big increase in employers’ social security payments.
The Labour Party’s first budget in 14 years raised taxes by 40 billion pounds in all. Prime Minister Keir Starmer and Reeves said the tax increases would allow them to spend more on public services including the National Health Service.
Reeves said the budget had provided “the stability and platform that we need to move forward” and that business could now be certain in tax rates moving forward, adding she had heard a lot of feedback from the budget but not many alternatives.
“I’m really clear: I’m not coming back with more borrowing or more taxes,” Reeves said at the CBI’s annual conference, adding the budget had wiped the slate clean.
“As a result, we won’t have to do a budget like this ever again.”
CBI Chief Executive Rain Newton-Smith said that the National Insurance changes “caught us all off guard” and contributed to creating “a heavy burden on business.”
Starmer earlier said that he wasn’t surprised that budget measures had been criticised by those it impacted, adding the government had to take “big calls” to protect public services.
The CBI’s complaint comes amid broader signs of an economic slowdown in Britain both before and after the budget, a blow to Reeves and Starmer who have pledged to make economic growth a priority.
But Britain’s budget watchdog has said Reeves has left little room to absorb any increase in government borrowing costs without either raising taxes or missing her goal to reduce debt.
“Tax rises like this must never again be simply done to business,” Newton-Smith said.
Keith Anderson, chief executive of Scottish Power, said there was a “changed atmosphere” compared to pre-election Labour events when the party was burnishing its pro-business credentials.
“It’s important that government and business get back around the table,” he told Reuters before hosting the conversation with Reeves.
“They need to get on the front foot and tell the story of how they get the growth, how they get the investment,” he said, adding that any backtracking could knock confidence.
Britain has low investment by international standards and many economists see this as a key cause of its weaker productivity compared to the United States, Germany and France.
