Chancellor urged to take ‘hard choices’ rather than hit businesses with more tax

Rachel Reeves has been warned not to inflict “death by a thousand taxes” on British business in Wednesday’s Budget.

The head of the Confederation of British Industry (CBI) Rain Newton-Smith said the Government must “change course” and avoid heaping more costs on firms.

The Chancellor will hike taxes to fill a black hole in the public finances as she faces the prospect of a downgrade in the Budget watchdog’s economic growth forecast for every year of this Parliament.

At the CBI’s conference in Westminster, Ms Newton-Smith urged Ms Reeves to stand up to Labour’s backbenchers to take tough decisions on issues such as cutting welfare spending.

She said Ms Reeves had to prove she was committed to economic growth and make the hard choices to deliver it.

“Prove it – against opposition, against short-term politics, be it on welfare, be it pension increases, show the markets you mean business,” she said

“Short-term politics leads to a long-term decline, and this country cannot afford another decade of stagnation.

“That means making hard choices for growth now before they get harder, having the courage to take two tough decisions rather than 20 easier ones.

“Raising the headroom to make promises stick, it means one or two broad tax rises, rather than death by a thousands taxes.”

The scale of the task facing the Chancellor was underlined by a Sky News report that the Office for Budget Responsibility has downgraded its forecast for 2026 and every other year before the next election due in 2029.

Ms Reeves has already acknowledged publicly that growth forecasts will be hit due to the OBR’s revision of its assumptions about productivity.

The downgrade, and the subsequent reduction in tax revenues, will force Ms Reeves to hike taxes to balance the books and build a bigger buffer against future shocks than the historically-low level of headroom she has previously given herself.

In her search for extra taxes, she could hit more than 100,000 high-value properties with a levy that applies to those worth more than £2 million and could raise £400-£450 million, The Times reported.

Some 2.4 million properties in the top three council tax bands would be revalued to determine which would be subject to the surcharge.

People will be able to defer the cost until they die or move house to avoid forcing them to sell up, according to the newspaper.

The Chancellor is also widely expected to extend the freeze on income tax thresholds, potentially dragging around 1.75 million people into paying more to the Exchequer.

The Institute for Fiscal Studies think tank estimates that a two-year extension to the current freeze in the thresholds would mean 960,000 more people paying income tax and 790,000 more people dragged into the higher rate as their wages increase.

As Ms Newton-Smith called for tough decisions on welfare, the Chancellor appeared set to lift the two-child benefit cap, a move aimed at easing child poverty and one popular with Labour MPs and activists, but which could cost more than £3 billion.

But Ms Reeves will extend a crackdown on benefit fraud in a bid to save £1.2 billion by March 2031.

At the CBI conference, Business Secretary Peter Kyle promised measures to slash red tape for firms in the hope of boosting economic growth.

He announced “a rolling programme of industry-led task forces to scrutinise regulation that’s slowing down growth”.

“These task forces will identify the red tape that needs to be culled and they will recommend smarter, sharper regulation that builds and benefits a modern, competitive business landscape,” he said.