The boss of the Confederation of British Industry (CBI) has urged the Chancellor to ditch Labour’s manifesto pledge not to raise taxes on working people as concerns in the corporate sector ramp up ahead of the autumn Budget.
Writing in the Guardian newspaper, CBI chief executive Rain Newton-Smith said the “time for tinkering is over” and warned Rachel Reeves against “slavish adherence” to tax promises made in the run-up to last year’s general election.
Speculation is mounting that Ms Reeves will unveil more tax hikes in the November 26 budget as the UK economic outlook worsens.
The Chancellor is hamstrung by an election vow not to increase income tax, national insurance and VAT – the three main revenue raisers for the Treasury.
Businesses were sent reeling after her inaugural budget in October last year saw them hit with a rise in national insurance contributions (NICs), as well as an increase in the minimum wage.
In a surprise intervention, Ms Newton-Smith said times had changed and so should the Government’s taxation plans.
She said: “The fact is that geopolitics and global markets have shifted.
“The world is different from when Labour drafted its manifesto, and when the facts change so should the solutions.
“The Chancellor cannot raid corporate coffers again so she must look elsewhere, embracing long-term strategic tax reforms rather than maintaining a slavish adherence to manifesto promises on tax or ideas based on the world as it was 18 months ago.”
She also called for an overhaul of taxes, saying long-term reform was needed for business rates, VAT and stamp duty.
Ms Reeves must “avoid short-term solutions that risk us getting stuck in a cycle between fiscal events”, Ms Newton-Smith said.
She said: “The Chancellor must commit to tax reform, not just tax rises.
“It is the structure of the system, not just the rates, that holds back growth: business rates penalise investment; the VAT threshold discourages scaling; and stamp duty restricts labour mobility.”
In a warning against penalising the business sector further, she said: “A further tax rise for enterprise would run contrary to the promises of autumn 2024, when businesses last stomached a tax hit.
“Further rises would leave us with a growth plan in name only.”
