Autumn Budget: ‘Window is closing’ on Labour’s growth mission
Ahead of the Autumn Budget, City Reporter Samuel Norman sits down with top industry names for a Budget Briefing. This week, chief executive of BusinessLDN shares what he thinks could be the capital’s 21st century moment.
The “window is closing” on the government’s mission to achieve economic growth, the boss of London’s business advocacy group has warned as businesses brace for punishing tax rises at next month’s Budget.
John Dickie, chief executive of Business LDN, told Morning Wire chancellor Rachel Reeves must weigh up the damage that any possible tax change could wreak on the economy.
“The absolute meta point across all the stuff the government is thinking about is – as they say when training doctors – first do no harm,” Dickie said.
He added the focus of the budget should be the pursuit of long-term economic growth, even if it meant political consequences in the short-term.
“The window is closing – if you don’t take these tough decisions now you’re probably not going to make them in a year or two’s time, because you’re getting closer to an election, and people shy away from short term painful things,” Dickie said.
Reeves will deliver her second Autumn Budget on November 26 even as businesses are still left reeling from the Chancellor’s first fiscal event.
The Office for Budget Responsibility (OBR) is expected to have handed Reeves a dire evaluation of the UK economy in the group’s pre-Budget report.
Growth forecasts are anticipated to have been slashed along with downgrades to productivity, which will increase the amount of spending cuts or tax hikes the Chancellor will have to make in the Budget.
“They do need to increase taxes… but what would be really damaging is if we tax businesses in a way that will reduce confidence, reduce investment, and thus reduce growth and jobs.”
Avoid last year’s risks
Dickie said businesses are hoping to avoid a repeat of October 2024, where Rachel Reeves pushed up employer national insurance contributions and hiked the national minimum wage.
He said there was a “risk” that the government would lean on a range of “smallish individual taxes” in order to plug its deficit – anticipated to be around £30bn.
“The problem with that is the cumulative effect of those measures will hit the confidence of businesses about investing in Britain,” Dickie added.
‘Sin’ taxes are expected to be at the top of the Chancellor’s list, which could include adding levies to the likes of gambling and junk food to help rebuild eroded her fiscal headroom.
Higher duties on junk food would follow the government piling extra red tape onto supermarkets with bolstered healthy food standards.
Reeves is also tipped to hike the duty on bookies to 21 per cent, from 15 per cent, in line with online casinos.
“I think the government needs to be really careful that it doesn’t do things that will only affect a sector, but have a wider impact on business confidence,” Dickie said, adding that gambling and tobacco levies would not “actually bring in very much money”.
Scrap stamp duty on shares
The Business LDN chief proposed scrapping stamp duty on shares to offer a major boost to the City.
Top voices across the London market have voiced concerns over the 0.5 tax paid when buying UK stocks.
“This is a brilliant example of something that absolutely is tough,” Dickie said.
“You’re going to have to find 4 billion quid from somewhere – but it will have a tremendous signalling effect for the government.”
He added the move would allow the government “to say to the world: we know we’ve got problems with the performance of some of the financial markets in London, and we’re acting to restore their competitiveness.”
The tourist tax was another contender Dickie named that could help drive the government’s growth mission.
Culture secretary Lisa Nandy hinted that the government was open to reforms earlier this year, telling Elle UK magazine that fashion was in the “soul of the nation” and ministers recognised its “centrality” to the economy.
Earlier this year, the ex-chief of British Airways, now head of the World Travel and Tourism Council, said Britain was missing out on the tourism boom due to having “layer upon layer of taxes.”
Dickie said: “The government’s not really losing out by giving them the VAT free back, because they’re not coming here”.
The business group chief urged now was the prime moment to pull the levers on these reforms and unleash London – and the wider country’s – potential.
“In a world of really considerable geopolitical instability and macro economic stability, London is a beacon of relative stability” he added.
Dickie said November 26 would answer the question whether Labour “have learned on the job” from their mistakes.
“If the Chancellor delivered a Budget like that – I think this would be London’s 21st century moment”.