This year, Labour’s message to business has been the UK is open for business. Growth remained the top priority. As the engine room of the UK economy, London called to the faraway town that is Westminster. From our own spot by the river, we ask: has the ice age come?
It sounds counterintuitive, but Reeves wasn’t focused on voters yesterday. Her audience was Labour’s backbench. And the bond market. This meant the Chancellor focused on short-term challenges. She adopted a defensive approach because of current polling and pressures from within the Labour Party. She didn’t have any other choice.
Rumours and the early publication of OBR forecasts meant we knew what was in the Budget before the Chancellor even stood up. There wasn’t a rabbit. In fact, there wasn’t even a hat to pull one from.
While Reeves showed some confidence, she was undermined by events outside of her control. The markets saw the stark reality of headline fiscal measures. They knew what tax raises were coming – and when. It meant the opportunity to write the script and provide the context for key measures was lost.
Reeves said the choices were hers. But they weren’t. Not really.
Starmer said it would be a Labour Budget with Labour values. What he meant was the Labour backbench’s values. Reeves’ choices were restricted to what MPs would accept. The challenge: keep her and Keir Starmer in post. And it will. In the short term.
This was Labour’s second Budget asking businesses to pay more. Growth forecasts are downgraded from next year for every year.
Does that make Rachel Reeves the head cheerleader for the anti-growth coalition?
No. The Budget wasn’t anti-growth. It just wasn’t pro-growth, either. It was a Budget of missed opportunities.
Reeves chose a series of measures to raise money, instead of one or two. She squibbed her chance. Not only to reform our tax system, but to set out an economic vision beyond the nebulous ‘growth’.
This approach risks a series of unintended consequences because of the cumulative impact of these tax increases.
Many of the changes are unlikely to raise significant revenue in the immediacy. This foretells a difficult 2026 Budget with more tax raises to come.
In unveiling her Budget, the Chancellor made it clear that business can help shape the detail. This includes improving the tax system to better support entrepreneurs and reforming business rates. Grasp the nettle. Make your voice heard.
Politically, Rachel Reeves will feel she’s given meat to the Parliamentary Labour Party. Her big moment? Scrapping of the two-child benefit cap. This is an issue that is close to the heart of many Labour voters and MPs.
The Chancellor will hope voters feel Labour is making a positive difference to the cost of living. But honestly. Will people think they’ll be better off because of this Budget? Will they trust that Reeves won’t come back for more next year?
Reeves asked everyone to contribute and froze income tax thresholds for three more years. Labour will say it’s technically not a breach of their manifesto. But that detail is lost in the weeds.
Labour promised to keep taxes for working people as low as possible. Will voters think they’ve broken their promise? Personal and other tax changes will deliver an additional £26 billion for the Exchequer in 2029/30. The tax-to-GDP ratio is forecast to increase to an all-time high of 38.3% of GDP in 2030-31.
I’m not sure this is what rebuilding public finances is supposed to look like.
With elections in London, Scotland and Wales next year, Keir Starmer will hope voters are seeing the greens shoots. However, the OBR’s downgraded growth forecasts risk dashing these hopes. Labour is losing support on the left and the right. Its MPs are watching the shattering of Labour’s electoral coalition with fear. The political tensions will now shift to the challenges ahead. This means asking whether Keir Starmer is the right person to answer them in the long term.
Next year’s Budget will be this Government’s third. By the end of 2026, we’ll be half-way through this Parliament. Closer to the next election than the last. Economic challenges and headwinds will prevail. Inflationary pressures are likely to test the Bank of England and businesses. The polls are tight. The pressure on the PM and the Chancellor won’t ease.
This is an opportunity for businesses whose influence will only grow. Over both the incumbent Labour Government, and its challengers.
Governments – and their successors – crave solutions. With their real-world experiences, this is the chance for businesses to engage decision makers. Influence the stakeholders that matter. And develop the solutions for our economic challenges. The country can’t afford for you not to.
Want a seat at the table? Get in touch with TEAM LEWIS to see how we can help your business.
