Chancellor urged not to raise taxes on ‘drained’ businesses in Budget

Rachel Reeves must halt any further tax rises on businesses as firms face a “make-or-break moment” at next month’s Budget, the British Chambers of Commerce (BCC) has said.

After raising taxes by £40 billion last year, the Chancellor is widely expected to be preparing further hikes for November’s Budget as she battles to stick to her election promises and self-imposed debt targets.

But in a submission to Ms Reeves ahead of the announcement, the BCC urged the Chancellor to steer clear of increasing taxes on companies, arguing business confidence had still not recovered from last year’s rises.

BCC director-general Shevaun Haviland said firms felt “drained” and could not plan ahead as they expected “further tax demands to be laid at their feet”.

Ms Haviland said: “Last year’s budget took the wind from their sails, and they have been struggling to find momentum ever since.

“The Chancellor must seize this moment and use her Budget to deliver a pro-growth agenda that can restore optimism and belief amongst business leaders.”

She added: “This year’s Budget will be a make-or-break moment for many firms.”

As well as calling for a commitment to avoid further increases taxes on businesses, the BCC’s submission urged a reform of business rates and the removal of the windfall tax on oil and gas introduced by the last government.

In more than 60 recommendations, the industry body proposed further infrastructure investment, cuts to customs barriers and action on skills shortages, including a wage subsidy scheme for young people with long-term health issues.

Labour has made much of its plans to approve 150 major infrastructure projects by the next election, and has already pledged to support expansions of both Heathrow and Gatwick airports – another of the BCC’s requests.

And while the Treasury would not comment on Budget speculation, a spokesperson for the department insisted the Chancellor would “strike the right balance” between ensuring funding for public services and securing economic growth.

But Ms Reeves is almost certain to face another round of difficult trade-offs as she prepares to deliver her second Budget.

At the spring statement earlier this year, the Chancellor left just £10 billion of headroom against her debt target.

Since then, economic circumstances have deteriorated, with inflation proving higher than expected, borrowing costs increasing and the Office for Budget Responsibility expected to downgrade its growth projections after reviewing its approach to forecasting productivity improvements.

The Government has also committed to a number of spending increases, including partially reversing cuts to the winter fuel allowance, and is expected to announce the lifting of the two-child benefit cap.

All these factors have led some economists to suggest Ms Reeves will need to find another £40 billion if she is to keep meeting her targets – and £50 billion if she is to restore her previous headroom.

Meanwhile, the Government insists that it will stick to its manifesto pledge not to increase income tax, national insurance or VAT, narrowing her options for raising revenue.

Shadow chancellor Sir Mel Stride said the Chancellor did not need to raise taxes again, but instead needed to get a grip on spending and, in particular, the “spiralling welfare bill”.

He said: “Businesses need certainty, but all they have from this Labour Government is constant speculation about damaging tax rises.”

Ms Haviland acknowledged that the BCC’s requests were “no small asks”, but added that if the Budget could “deliver”, the promise of stronger growth “can finally become reality”.

A Treasury spokesperson said: “The Chancellor has been clear that at Budget she will strike the right balance between making sure that we have enough money to fund our public services, whilst also ensuring that we can bring growth and investment to businesses.”