'We need the right conditions' to drive business growth - Chambers stress as Chancellor puts country on notice for tax hikes

The Chancellor Rachel Reeves declined to confirm whether Labour would keep its manifesto promises to not to raise income tax, national insurance or VAT, saying “we will all have to contribute” as she took the unusual step of hosting a press conference three weeks ahead of the forthcoming November 26 Autumn Budget so that people "understand the circumstances we are facing".

She said she would make “the choices necessary to deliver strong foundations” for the economy in a world that has “thrown more challenges our way”.

Reeves blamed US tariffs, the former Conservative government and issues such as The Office for Budget Responsibility’s expected downgrade of economic productivity for the “hard choices” she will have to make as Chancellor to plug the black hole caused by U-turns on welfare spending cuts and increased debt interest costs.

Businesses across the West Midlands, however, have been hit by rising wage bills, having to pay higher National Insurance contributions and soaring energy costs and are desperate to see some glimmers of hope for greater future prosperity in the forthcoming Budget.

Speaking after this morning’s press conference in Downing Street, Sarah Moorhouse, chief executive of Black Country Chamber of Commerce, said: "The Chancellor talks about supporting businesses to create jobs and innovate but our members need to see that translated into action in the Budget.

"Businesses need stability in tax policy, restraint on further employment cost increases and the confidence to plan ahead. Rising national insurance contributions and uncertainty around future changes are making it harder for companies to invest and grow and I'm not sure the speech today provides much reassurance.

"The Black Country has the industrial base to drive the productivity growth the Chancellor is talking about. Our 3,000 manufacturers employ 50,000 people and contribute over £2 billion to the local economy. But they need predictable conditions to do their bit.

"Talk of efficiency and cutting waste is all well and good but businesses are telling us they're struggling with compound pressures - rising wages, higher national insurance, soaring energy bills and difficulty accessing finance.”

She said businesses need a Budget that will give firms “the headroom to breath, invest and create jobs” and she added: “That means no more surprises, adequate notice of any changes and recognition that you can't grow an economy if employers can't afford to employ people.

"The Chancellor says she wants to support business. The Black Country is ready to deliver growth, but we need the right conditions to do it."

Emily Stubbs, head of policy at Greater Birmingham Chambers of Commerce, said of today’s briefing: “With speculation rife, Rachel Reeves had no choice but to lay the groundwork for the ‘necessary choices’ she will be making in her upcoming Budget to fill the government's fiscal black hole and regain her economic headroom.

"Amongst those choices, it seems, will be both spending cuts and further tax increases. The Chancellor gave no indication of which taxes might be raised, but it seems that a further freeze on personal allowances, and an increase in income tax - contrary to Labour's manifesto - may be on the cards. 

"For those in employment, the latter could be offset by a decrease in National Insurance, though self-employed individuals and pensioners would be left to feel the full effects.

"Businesses share the Government's stated ambition to drive economic growth and boost productivity. 

"However, they are unable to act on that ambition under the weight mounting cost pressures.”

She said the Chamber’s latest data shows businesses in the Greater Birmingham area have downgraded investment plans in Q3 following a sustained decline in cashflow throughout the year and “in anticipation of uncertain economic terrain ahead”.

She added: "Anecdotally, many firms are telling us that in the current climate, they're struggling just to stand still.

"If the Chancellor is serious about driving growth, levying more taxes on businesses is unequivocally the wrong move.

"Businesses need the Chancellor to deliver a budget that boosts trade, tackles skills issues and unlocks investment for infrastructure."

Johnthan Dudley, head of manufacturing and SME corporates at leading audit, tax, advisory and consulting firm Crowe UK, described today's speech by the Chancellor as an "unprecedented ‘rolling of the pitch’" as it looks like Labour is heading towards breaking some of its manifesto commitments in order to plug the black hole in Britain's finances.

He said: “It’s looking increasingly likely that we’ll see a U-turn on at least some of the manifesto – likely through income tax increases to plug the funding gap in the nation’s coffers, even if it’s dampened for some by a reduction in employees’ NIC.

“There’s a clear signal to taxpayers and their advisors that change is afoot. Although some changes cannot take effect until the new tax year, some could be implemented immediately – we could even see an income tax rate rise effectively ‘from when the Chancellor sits down’. It’s happened before, just not recently.

“For some time, many commentators have signalled that simply ‘tinkering’ with other taxes won’t raise anywhere near enough revenue, and that at least one of the ‘big three’ revenue-earning taxes must move. It now seems the Chancellor is conceding to that uncomfortable reality.

“Today’s speech is a fairly unprecedented ‘rolling of the pitch’ ahead of an arguably already delayed Budget. It has fuelled speculation for weeks, potentially having a negative impact on economic activity – which may well be the reason for today’s speech.”