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Reeves tells businesses no more tax rises as she defends Budget

November 25, 2024
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Getty Images Rachel Reeves at the CBI conference in November 2024Getty Images

Chancellor Rachel Reeves has told businesses she is “not coming back with more borrowing or more taxes” as she defended the tax rises on businesses announced in the Budget.

Reeves told the Confederation of British Industry (CBI) conference that despite “a lot of feedback” on her tax and spending plans, she had not heard many alternatives.

Her comments come after the boss of biscuit giant McVitie’s warned it was “becoming harder to understand” the case for investing in the UK after the Chancellor’s decisions.

Reeves announced a near-£70bn increase in public spending in her first Budget last month, of which more than half will come from higher taxes.

Businesses are set to bear the brunt of tax increases, due to the Chancellor deciding to increase the rate employer’s pay in National Insurance, as well as reducing the threshold they start paying it at.

There has been backlash to the measures announced, with firms warning not just higher taxes in April, but higher minimum wages, higher business rates, as well as costs associated with new workers’ rights, could impact jobs and pay – and ultimately hit the government’s goal of growing the UK economy.

But Reeves told industry leaders that her Budget provided the “stability and the platform that we need to move forward”.

Asked if she could confirm there would be no more big tax rises on businesses, Reeves said: “I faced a problem, and I faced into it…we’ve put our public finances back on a firm footing, and we’ve now set the budgets for public services for the duration of this Parliament.

“Public services now need to live within their means because I’m really clear, I’m not coming back with more borrowing or more taxes.”

While rises in the minimum wage and workers’ rights reforms have been praised by unions and workers’ groups, bosses have said businesses are being weighed down by multiple changes coming into force at once, with some calling for them to be “phased in”.

In her speech to the conference earlier on Monday, Rain Newton-Smith, the boss of the CBI, argued that “tax rises like this must never again simply be done to business”.

She said the policy changes meant businesses were facing “a tough trading environment that just got tougher”.

“When you hit profits, you hit competitiveness, you hit investment. You hit growth,” she added.

Ms Newton-Smith referred to a recent survey by the CBI, which found almost two-thirds of 185 companies who responded think the Budget will damage UK investment.

Salman Amin, the boss of McVitie’s, said that most of his investment in the last decade or so had come to the UK, but that it was “becoming harder to understand” the case for investing in the country.

“What strikes me is that in the race to grow, we seem to be turning our backs on the industries which have built Britain for decades,” he added.

Stuart Paver, chair of Pavers Shoes, an outlet shop chain with more than 190 stores in the UK and Ireland, told the BBC the tax changes announced in the autumn would cost his business £4.2m and would “hinder expansion”.

“We’re opening about 10 to 15 stores a year at the moment, and that plan has been slowed down at the moment as we go through the uncertainty,” he told BBC Radio 4’s Today programme.

‘Milked as the cash cow’

Meanwhile, Rupert Soames, chairman of the CBI, said the Budget had made employing young, part time and low paid staff “much more expensive”.

Speaking after Ms Reeves’ appearance, he said: “Many of the things in the Budget are helpful. For instance, the corporate tax road map.

“But there is no doubt here, that in this Budget, business has been milked as the cash cow.”

Last week, a group of major retailers, including Tesco, Amazon and Next, also wrote to the chancellor to warn her of the impact tax changes would have.

Firms such as Sainsbury’s and Marks & Spencer have said they will face a huge jump in costs and they may need to increase prices for customers.

However, others have said that asking multimillion-pound companies to pay more in taxes was one of the fairer ways to improve funding for services like the NHS.

“No-one is questioning that we need to see the tax rises to really help fund our public services,” said CBI boss Ms Newton-Smith.

But she said that firms had been taken aback by the lowering of the threshold for the payment of National Insurance, and that the pain was “really serious”.

She urged government in her speech to consider a number of reforms to improve economic growth, such as giving companies more flexibility around how they spend money using the apprenticeship levy.

She also said the chancellor should look at updating business rates for commercial property, as well as simplifying the planning system.

Conservative leader Kemi Badenoch told the CBI conference she was concerned the tax burden on business was increasing.

“The new government believes that invisible businesses can absorb these costs, but it is everyday people who bear the brunt, either in higher prices or lower wages, sometimes both,” the former business secretary said.



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