Chancellor signals more headroom is needed in Budget
The Chancellor gave the clearest sign yet that he wants to give himself more financial breathing room in the November Budget.
Speaking at a meeting of business leaders in Saudi Arabia, Rachel Reeves said she wanted to ensure the UK had “sufficient leeway” to ensure resilience to future shocks.
This means that the £9.9bn buffer it set aside in last year’s budget is not enough to ensure resilience to changing circumstances.
Increasing that gap would require additional tax increases and/or spending cuts, and he confirmed he is considering that.
Reeves did not rule out the possibility of tax increases when asked whether he would consider them ahead of the Budget, adding that economic growth would be “a big part of the Budget story”.
“But of course we look at taxes and expenditures to ensure that we have enough room but also to be resilient to future shocks just by ensuring that those fiscal rules are followed,” he said at Fortune Magazine’s global forum in Riyadh.
The question is whether his emphasis on increasing this buffer will be enough to meet his manifesto commitments not to increase income tax, VAT or workers’ national insurance rates.
The previous insistence that these promises would stand has recently appeared to have weakened to a commitment to keep taxes constant. working people “as low as possible”.
Earlier this month, the Institute for Fiscal Studies think tank predicted the chancellor It will need to come up with £22 billion. To cover the government’s financial deficit.
Rachel Reeves, the first British prime minister to visit the Gulf in six years, will meet ministers from Saudi Arabia and Qatar on Monday and Tuesday.
A number of bilateral trade and investment agreements are expected to be announced during his visit to the Future Investment Initiative (FII) in Riyadh, dubbed “Davos in the Desert”.
The government is determined to promote the UK as a stable and attractive place to do business for the countries that make up the Gulf Cooperation Council (GCC).
There are warnings in the UK that the government’s flagship Employment Rights Bill, which gives workers new rights and protections around sick pay and unfair dismissal from their first day on the job, will deter job creation.
He will join dozens of British and international CEOs during the FII event on Tuesday after meeting senior Saudi royals on Monday.
Following a trade deal with India, a tariff deal with the US and a closer reset with the EU, the chancellor is keen to pursue a trade deal with the Gulf Cooperation Council (GCC), which includes Kuwait, the UAE, Qatar and Saudi Arabia.
Reeves said: “Our number one priority is growth, so I’m bringing the UK’s stability, regulatory agility and world-class expertise directly to one of the world’s most important trade and investment centres, making it in our national interest.”
But even according to the government’s own estimates, such a deal would add only £1.6bn a year to the UK’s GDP, less than a tenth of 1%.
While the chancellor is beating the drum on behalf of the UK abroad, the workers’ rights bill, which will be discussed in the House of Lords on Tuesday, is facing criticism from unexpected quarters at home.
The Solution Foundation, which has been on the Labor Party’s radar for many years, has joined a chorus of business voices warning that giving employees additional rights and protections around unfair dismissal and sick pay from the first day of work will “hinder recruitment” at a time when vacancies in the workplace are increasing.
On Friday, 13 business groups, including the CBI, Make UK and the Federation of Small Businesses, wrote to the House of Lords urging support for an amendment that would introduce new rights in six months.
While the government has been praised in business circles for striking trade deals, some say it has done a better job of convincing foreign investors than reassuring UK companies, many of whom faced a £25bn tax increase in the last budget and fear possible further tax rises in the next one.
