By David Milliken
LONDON (Reuters) -British finance minister Rachel Reeves should break pre-election promises not to raise taxes on the general public rather than target businesses again in her November 26 budget, the head of the Confederation of British Industry said on Tuesday.
Writing in The Guardian newspaper, CBI chief executive Rain Newton-Smith said new tax rises on businesses would go against the government’s goal to boost economic growth and commitments made after last year’s budget, which raised taxes by the most since 1993.
“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,” Newton-Smith said.
Before July 2024’s election, Labour promised not to raise the rates of income tax, value-added tax or national insurance contributions – the main sources of government revenue.
But in October’s budget Reeves increased employers’ national insurance contributions – which she said were not covered by the pledge – by 25 billion pounds ($34 billion).
Since then, businesses have blamed the tax rise, which took effect in April alongside an increased minimum wage, for weaker hiring and investment and higher prices.
At this year’s budget, many economists think Reeves will need to find tens of billions of pounds more in revenue due to higher borrowing costs, a less certain growth outlook and a failure to pass welfare cuts through parliament.
Newton-Smith said Reeves should restructure the tax system, repeating longstanding calls to change business property taxes.
Other areas for reform included thresholds around tax and state-subsidised childcare, taxes on house purchase which discouraged labour mobility, road pricing and the threshold at which businesses must start to pay VAT.
“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,” Newton-Smith said.
($1 = 0.7384 pounds)
(Reporting by David Milliken; Editing by Sachin Ravikumar)
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