Tax rises announced in the recent Budget will hit businesses rather than boost growth, the head of one of the UK’s biggest business groups warned on Monday.
The Confederation of British Industry (CBI) has joined a chorus of voices opposing Chancellor Rachel Reeves’ tax measures, which Labor says are needed to plug a £22 billion “black hole” left by 14 years of Conservative government.
Labor put growth at the heart of its campaign at the last general election, but businesses believe the £40 billion tax rises announced last month – the biggest such increase in a budget. since the government of John Major in 1993 – will stifle investments.
Rain Newton-Smith, who heads the CBI, is expected to tell the group’s annual conference in London that “too many businesses are having to compromise on their growth plans”.
She will say: “Across many sectors, margins are being squeezed and profits are being hit by a challenging business environment which has just tightened.
“And there’s the problem: Profits aren’t just extra money that companies can put in a pillowcase. Profits are an investment.
Ms Newton-Smith will add: “When you hit profits, you hit competitiveness, you hit investment, you hit growth. »
The Office for Budget Responsibility (OBR), which monitors government spending plans and performance, has already said Most of the burden of tax increases will be passed on to workers through lower wages, and to consumers through higher prices.
Last week, dozens of retail bosses signed a letter to the chancellor, warning of dire consequences for the economy and jobs if she continues with her budget plans.
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Up to 79 signatories joined the British Retail Consortium’s (BRC) scathing response to the Budget announcement, which claimed Labour’s tax rises would increase their costs by £7 billion next year alone.
He warned that higher costs, due to measures such as the increase in employers’ national insurance contributions and the increase in the national living wage next year, would be passed on to shoppers and hit jobs and jobs. ‘investment.
The letter, backed by the British boss of the country’s biggest retailer, Tesco, says: “The sheer scale of the new costs and the speed with which they are occurring creates a cumulative burden that will make job losses and rising costs inevitable. price a certainty. »
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“Companies will now have to make a choice”
A few days after the budget, Chancellor Reeves admitted She was ‘wrong’ to say tax rises weren’t needed during the election campaign – as she warned businesses may have to make less money or pay their staff less to cover a tax rise .
But she claimed the previous government had “hidden” the “huge black hole” in the finances and that she only discovered the scale of it once her party was elected.
She said Sky News Sunday Morning with Trevor Phillips: “Yes, businesses will now have to make a choice: whether they will absorb this through efficiency and productivity gains, whether it will be through lower profits or perhaps lower wage growth. »