Reeves given stark Budget warning from business to avoid ‘death by a thousand taxes’
Rachel Reeves has been given a stern warning from the business community to avoid “death by thousands in taxes” in her long-awaited budget this week.
CBI director general Rain Newton-Smith will tell the chancellor on Monday that Britain risks being stuck in “Groundhog Day”, where politics trumps growth and bold decisions are not taken.
A speech to hundreds of business leaders at the QEII headquarters in London will call on the government to “change course… and work with business to fix what is broken”.
“We face a crossroads,” Ms Newton-Smith is expected to say. “Our biggest fear is that if we make the wrong choices on Wednesday… shorter-term interventions; bolder choices not being made; more policies on growth… then we risk being trapped in a stop-start economy.
“Where huge tax increases occur every year, even every fall and spring. That’s not the way to grow. It’s a cycle of doubt and uncertainty. That’s the way to decline.”
The attack is a move on Ms. Reeves’s last-minute U-turn to raise income tax, which was now expected to collect smaller wealth taxes on capital gains, real estate, gambling, the banking sector and other areas.
The comments came as ministers, MPs and other senior Labor figures said Independent The budget aims to “pacify” angry bigots to prevent a leadership coup against Sir Keir Starmer. A poll of Labor Party members at the weekend suggested Sir Keir would lose a future leadership contest to any of four potential challengers.
Other important developments before the budget crisis:
- Pensioners will get an inflation-busting increase through the triple lock, the government has confirmed.
- It is also understood that the Chancellor is now ready to find £3.5bn a year to lift the child benefit cap.
- 1.3 million people would be dragged into paying the higher 40p income tax rate if thresholds are confirmed to be frozen further on Wednesday, new research has suggested.
- The Treasury believes additional savings of £1.2bn could be made by 2031 thanks to efforts to detect incorrect universal credit payments.
- Transport Minister Heidi Alexander raised concerns that there will be an increase in fuel taxes for the first time in 15 years and that electric vehicle drivers will have to pay a new tax.
The CBI attack on Ms Reeves was echoed by other experts.
Andy Haldane, former chief economist at the Bank of England, said the “fiscal fandango” of recent months had caused “paralysis” among businesses and consumers.
“We need decisive action to reprehensibly stamp out any idea of further tax increases,” he said.
Former Institute for Fiscal Studies (IFS) director Paul Johnson said Budget disruptions, U-turns and speculation were “really damaging”.
“The first thing the Bank of England says in its latest report about the reasons for the slow growth over the last few months is speculation about the Budget,” he added.
Former chancellor Lord Clarke told Times Radio that the country risks a “serious financial crisis” if the government gets the budget wrong and that raising income tax is the “best choice”.
But Sharon Graham, general secretary of Unite the Union, said she did not believe Ms Reeves would survive as chancellor and demanded a “real Labor Budget”.
In her speech, Ms Newton-Smith will highlight the anger felt by businesses over employment rights legislation currently passing through parliament. It will also make clear that Ms Reeves and Sir Keir must find the will to fight their own supporters to make benefit cuts and rethink the pension triple lock.
“Ahead of the budget, a lot of you will say, it feels like we’ve gone off track.” “A year after the budget started to cut a deficit, £24bn a year is being charged in extra costs, the tax burden is at its highest in 25 years and two-thirds of those taxes are being passed on to the business before you even make a profit.
“A year later, here we are again. Another billion-pound fiscal deficit. More rumors, more U-turns, increasing uncertainty. Businesses are holding their breath again. Investment has stalled, projects are on hold again. It doesn’t feel like we’re on the move, more like we’re stuck in Groundhog Day.”
Challenging the government, Ms Newton-Smith will say: “Show markets you mean jobs, whether it’s welfare or pension increases. The only thing short-term policies lead to is long-term decline… and this country can’t afford another decade of stagnation.”
“That means making hard choices for growth now, before it gets even harder. That means one or two broad tax increases rather than death by thousands.”
Ms Reeves’s budget faces pressure from unions, which are still Labour’s biggest donors, and the TUC has made a number of demands on living costs ahead of Wednesday’s announcement.
The TUC is calling on the chancellor to make affordability a top priority by cutting energy bills, removing the two-child benefit cap and taking action to pay for work after new analysis showed people are just £12 a week better off since 2008 due to a lack of wages and economic growth.
TUC general secretary Paul Nowak said: “This Budget must be a living standards Budget. “Households up and down the country are still suffering from the Tory wage crunch, leaving a Labor government with a lot of ground to make up.
“That’s why Wednesday is such an important moment to show ministers are standing up for workers by making affordability a top priority.”
Transport Minister Heidi Alexander asked the BBC Sunday with Laura Kuenssberg Explaining whether speculation about tax increases is harming the economy, he said in the program: “The Budget Accountability Office’s review of productivity estimates showed that this whole process actually meant that the sands were shifting from the beginning and that we have a very difficult global economic environment.”
