Business leaders warn Reeves about the impact of her Budget tax rises
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Business leaders have warned chancellor Rachel Reeves at a private meeting that the economic environment is âextremely challengingâ, with companies facing major uncertainty due to her tax-raising Budget and the governmentâs planned employment reforms.Â
Reeves on Wednesday attended a meeting of the British Chambers of Commerce âbusiness councilâ, a group of senior corporate figures who gather every quarter to discuss the economic landscape.Â
Some 19 executives came to the gathering in south London from companies including SSE, NatWest, Heathrow, Drax, DP World, BP and Aviva.Â
In a straw poll of attendees around the table before Reevesâ arrival, only three said they expected the economic situation to improve in a yearâs time.Â
She used her opening remarks to acknowledge the challenges she had to address in Octoberâs Budget and insisted it would not be repeated in the future, according to people with knowledge of the meeting.
But executives told Reeves that her increase in employersâ national insurance contributions would have a significant impact on both investment and recruitment.
They also highlighted the governmentâs plans to boost workersâ rights and looming changes that will mean companies pay an extra ÂŁ2.7bn in business rates in two yearsâ time.Â
One business leader said they had told Reeves: âThe headwinds from national insurance contributions has caused issues â businesses have less appetite to recruit. The appetite to invest is lower.â
Another reportedly said: âBusinesses are pulling back on capital investment.â
Reeves gave a robust defence of her ÂŁ25bn increase in employersâ national insurance contributions, saying that the government needed to restore fiscal stability.Â
Martha Lane Fox, president of the British Chambers of Commerce, said after the meeting there was âno hiding the realityâ that the Budget had been tough for business.Â
âMillions of firms are now facing a raft of increased costs in the coming months,â she added. âHigher bills will impact on investment and recruitment. Our latest forecast also suggests the ripples will be felt across the wider economy.â
Lane Fox said the rising costs meant it was more vital than ever that the government delivered on its promise to create long-term frameworks for economic stability.Â
Last month Rupert Soames, chair of the CBI business lobby group, accused the government of treating employers as a âcash cowâ in a Budget that most viewed as âa bit shitâ.
Some ministers have become concerned about the impact of the rise in national insurance contributions â not just on companies but also various public services.Â
Hundreds of charities have signed a letter organised by the National Council for Voluntary Organisations warning that the rise will force them to cut staff or limit services.Â
There are also concerns inside government about the impact on nurseries, which have warned that parents could face higher fees or even some closures against the backdrop of higher national insurance contributions and a more generous minimum wage.Â
Labour has repeatedly said it found a ÂŁ22bn âblack holeâ in the public finances after winning the general election in July, necessitating tough decisions in the Budget.Â
After the meeting Reeves said the government would bring investment and reforms to kick-start economic growth: âMy Budget was one to wipe the slate clean in the face of an inherited ÂŁ22bn black hole and bring businesses the stability they desperately need. It involved difficult decisions, but has laid the foundations for growth.â
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2024-12-11 15:43:07