Chancellor concedes higher taxes could hit economic growth
Chancellor Rachel Reeves has acknowledged higher taxes could impact economic growth as she seeks to increase private investment in the UK.
Speaking at the British Private Equity and Venture Capital Association summit, the chancellor told investors she had to hike taxes in her maiden budget in order to place finances on a “firm footing and to fund public services”.
She said: “I think we got the balance right.”
Ahead of the upcoming Autumn Budget, businesses and investors have warned Reeves not to repeat last year’s tax raid, which included a £25bn increase to national insurance contributions and an increase to the national minimum wage.
However, industry figures predict it is highly unlikely she will move away from the government’s fiscal rules and commitment not to increase taxes on working people, making it increasingly likely that businesses, savers and investors will bear the brunt of the tax hikes.
Reeves said: “Growth is our number one mission. I do recognise that tax policy does impact economic growth, but…if you can grow the economy, you can make these decisions around tax and spend so much easier.”
Increase private equity
Reeves’ also claimed private equity investment will be key to hitting the government’s economic growth targets.
While the UK was the fastest growing economy in the G7 in the first half of the year, the chancellor noted the state cannot boost the economy alone.
She said: “You’re only going to get growth if you get investment…and that’s where private equity comes in.”
Labour has been attempting to boost investment in the UK in the first half of the year, claiming to have tackled red tape and reduce the amount of regulation.
She added: “We want to make it easier to do business in Britain, ripping out those things that have been blocking growth.”
She also told the summit she believes that investors are increasingly encouraged by the stability the UK market has to offer.
Michael Moore, BVCA chief executive said: “The Chancellor was clear in her comments about the importance of the private capital industry in driving economic growth.”
“By stating her ambition to streamline regulators, she shows that she understands some of the barriers to investment faced by our industry.”
Spending clampdown
In the first meeting of Starmer’s new cabinet, Reeves warned ministers they would be restricted in seeking emergency Treasury funding if they exceeded their spending plans, in order to protect public finances.
Reeves said: “Access to reserves claims are being tightened because I want to really bear down on spending.
“I recognise…to make sure that the numbers add up, it’s not just about what you bring in, it’s also what you’re spending.”