Rachel Reeves is strangling Britain’s economy through a relentless “death by a thousand taxes”, financial experts have claimed in advance of her Budget later this month. The dire assessment echoes warnings issued in the run-up to last October’s statement, when business leaders and economists signalled deep unease over impending tax measures.
In a Budget submission, they argued: “Hard choices must be made. ‘Death by a thousand taxes’ is not a credible way to deliver a thriving, prosperous economy.” With business taxes at a 25-year high, the CBI highlighted strains from a £25 billion employer National Insurance raid, sharp minimum wage hikes in the Chancellor’s previous Budget, and the Government’s workers’ rights Bill, which they say is piling further pressure on companies. The CBI suggested Ms Reeves must “challenge party orthodoxy” by confronting Left-wing MPs to take an axe to welfare spending and curb public outlays.
It also argued that income tax was preferable to more business levies, although millions of ordinary households may disagree.
CBI CEO Rain Newton-Smith told This Is Money: “Tax rises and spending cuts are unpopular, but the reality is that the Chancellor faces little choice.” The group described the economy as already “stuttering” under Labour’s watch.
CBI chief economist Louise Hellem painted a stagnant picture: “There’s an overwhelming sense of a country, and an economy, in stasis.” She attributed this to stalled growth-boosting action, low confidence, and investment hesitancy amid rising costs and uncertainty from the employment rights Bill.
Ms Hellem added: “We’re definitely not where we want to be. Growth in the UK is much lower than everybody wants it to be. Confidence is quite low at the moment. The big test for us is, does this Budget help improve decisions around investment, around hiring, and really point us as much as possible in that direction of higher growth?”
On income tax, Ms Hellem called it “the most sensible to look at” if manifesto pledges against hikes to income tax, National Insurance, or VAT were reconsidered: “It would have an impact on consumption but it would not be as damaging.”
The boss of Marks & Spencer voiced fears for consumers. Chief executive Stuart Machin said the Chancellor’s ominous speech this week, signalling painful tax increases and insisting “we will all have to contribute” to patching up public finances, had amplified worries.
He added: “It may have calmed the bond markets but it hasn’t really calmed our customers. Customers are worried about rising costs and they got more worried after yesterday.” Last month, Mr Machin urged Ms Reeves to “change course” to escape “an economic doom loop of ever higher taxes and lower growth”.
Paul Johnson, former director of the Institute for Fiscal Studies, recently told the annual conference of the Institute of Chartered Accountants of Scotland: “I’m assuming we’re going to get a pretty nasty set of tax rises in three weeks.
“You need clarity on what the model for growth is and we are so far away from achieving that.”
Ms Reeves faces raising up to £60 billion in the November 26 Budget through tax hikes and spending cuts – £30 billion to fix a financial “black hole” and another £30 billion in “headroom” to guard against future crises.
Analysis by the National Institute of Economic and Social Research (NIESR) pointed to a stinging income tax raid on middle earners: a 2p increase on the basic rate could net £20 billion, while a 5p hike on higher rates for more than seven million people earning over £50,270 might add £10 billion, hitting teachers and nurses alongside the better-off.
Speculation also swirled around mansion taxes, pension changes, and a wealth tax – with Labour backer Unison pushing for 2 per cent on assets over £10 million annually.
A report from wealth manager Rathbones warned professionals and business owners were growing anxious about being targeted.
Camilla Stowell, chief executive for wealth, said: “These were ‘the people whose ambition and success underpins the prosperity of businesses, organisations and communities across the UK’.
“We worry that the government may lose sight of the need for aspiration, and to support and encourage people to strive, build and succeed – because this is how the economy and country will succeed and grow.” Stowell concluded: “Short-term tax changes which undermine this may ultimately further slow economic growth.”
Ryanair boss Michael O’Leary has gone one step further, declaring the UK “doomed” under the present government.
The comments underline the pressure Ms Reeves is under as she prepares for her crunch statement in less than three weeks.
