Will the Budget push the economy off the cliff?
Downing Street is in chaos and the economy has flatlined. Now, with just a couple of weeks to go until we find out what’s really in Rachel Reeves’ Budget, Britain’s bosses are getting restless.
It used to be the case that Chancellor’s went quiet in the run-up to a Budget, keeping their powder dry and their mouths shut – but now it seems Rachel Reeves gives a set piece weekly update on just how bad things are going to be.
First there was the bizarre Downing Street speech in which she told the country that, 18 months into office, she’s discovered everything’s a right old mess and it’s all the fault of previous governments and other countries.
Then, earlier this week, she sat down with the BBC to explain that things are so bad there’s a very good chance that she’s going to have to break her manifesto promises not to raise the big taxes. “I could stick to those promises,” she said, “but then I’d have to cut spending.” And remember, no Labour chancellor comes into office to cut spending.
The context for all this, for the Budget, is an economy that grew 0.7 per cent in Q1, 0.3 per cent in Q2 and 0.1 per cent in Q3. The economy actually contracted in September.
If you find all this deeply frustrating and more than a little worrying, you’re not alone. Britain’s business leaders are speaking out.
Bosses speak out as Budget looms
This week Simon Emeny, executive chair of Fuller’s, one of the UK’s biggest listed pub chains, said the government needed “new ideas, new thinking” if it is to live up to its ambition to grow the economy. “I am frustrated by the lack of a clear plan to deliver the growth the Chancellor claims to be seeking,” he said.
Meanwhile, Mark Carpenter, chief executive of car dealership Motorpoint, told CityAM that months of leaks and trails over which taxes the government might hike in the Budget “is hugely unhelpful” – and “putting doubts into their minds.”
He added that “it’s not great if you’re going into a Christmas period with everybody not sure how much money is in their pocket.”
And Jennie Daly, chief executive of the housebuilder Taylor Wimpy, said this week: “Market conditions remain challenging, impacted by uncertainty ahead of the upcoming UK Budget and continued affordability pressures.”
Graham Bell, the boss of B&Q, told CityAM this week that “When people feel secure about the future, they invest in their homes, their skills, their communities and that’s when the economy really starts to move.” Clearly, we aren’t in that position right now.
Last week, Sainsbury’s boss Simon Roberts warned “what we don’t want to see is further impacts that may cause further inflation” and in September, BT chief Allison Kirkby told CityAM: “We’re already at peak government-inflicted costs.”
Meanwhile a slew of banking bosses have pleaded with the Chancellor not to tinker with their corporate tax rates and it seems not a day goes by without another business voice pleading with the government not to mess things up.
I fear those pleas are falling on deaf ears.
Tax rises are coming
In addition to a steady stream of stories about which taxes the Chancellor intends to raise – and let’s just count them of:
- Income tax
- Dividend Tax
- Alcohol duty
- Inheritance tax
- Property taxes
- Gambling taxes
- Pension taxes
… we now have a similarly unwelcome series of leaks about where Reeves is going to turn on the taps – starting, obviously, with the NHS but also of course on welfare spending.
The public is demoralised by all this. I know this because we poll the public, every month, and here’s what they tell us:
Just under half of Brits say their living standards have worsened over the last 12 months compared to just 14 per cent who have seen an improvement. Almost 60 per cent expect the UK will worsen over the year ahead. Over three quarters of Brits (76 per cent) say they feel the country is heading in the wrong direction; this has risen consistently every month since May.
People don’t feel motivated
Perhaps most worryingly of all, just 29 per cent of people agree with the statement that “Britain today is a country of aspiration, where people are encouraged to aim high and succeed.” Just a quarter agree that “Britain is a country that rewards hard work.”
And instead of offering us any hope, or business or certainty, we’re faced with the absurd spectacle – just two weeks before one of the most consequential Budgets in living memory – of Downing Street descending into chaos amid leadership speculation, rumours of plots and coups and confidence-sapping political pantomime.
Keir Starmer promised us “a politics that treads a little more lightly on people’s lives” – do you remember that? – instead for many people it feels like we’re being walked all over.
For businesses trying to plan, trying to grow, trying to turn a profit, trying to invest, it’s far from an ideal state of affairs.
The message, from business leaders, from me, is simple: get a grip.