CBI chair Rupert Soames: Reeves has created a ‘hole in the trust of business’
Rachel Reeves has created a “hole in the confidence and trust of business” by using the private sector to fill a £22bn hole in the government’s finances, the chair of the UK’s top business body has said.
Rupert Soames, chair of the Confederation of British Industry, said the Chancellor had “bruised” British companies after rolling out some £40bn worth of tax hikes at her Budget in October.
“The Chancellor told us at the time of the budget that there was an unexpected hole of about £22bn in the Government finances, and business was going to have to fill it. In filling in one hole, it’s created another, and that hole is a hole in the confidence and trust that business has in the Government,” Soames told BBC Radio 4’s Today programme.
“I think sometimes it’s not understood, the extent of the impact, particularly on companies that employ lots of people.”
The comments will ratchet up pressure on the Chancellor after a torrid week in which government borrowing costs have surged to 16 year highs, partly due to fears over the state of the UK economy.
While the government’s plans are expected to fuel a short-term surge in growth, a £70bn year spending splurge is expected to add to inflationary pressures this year and slow the pace of interest rate cuts.
Reeves’ £25bn rise in the National Insurance bill is also expected to pass through into price hikes and layoffs for firms over the next 12 months.
“We think the national insurance increases are going to feed through into inflation, we’re going to have a lower growth rate, but also, because of things like the Employment Rights Bill coming along, you’re going to find people laying people off and less likely to employ,” Soames added.
While Reeves ruled out another round of tax hikes at the CBI’s conference in November, she and the Prime Minister Keir Starmer have since declined to repeat the pledge.
Analysts have now warned of further tax hikes this year on the back of the rise in government borrowing costs, which threaten to wipe-out the fiscal headroom Reeves gave herself at the Budget and put the government on course to break its self-imposed fiscal rule.
Ministers have looked to reaffirm their commitment to growth in recent days, with the Prime Minister pledging to make the UK the global leader in AI.
“Our plan will make Britain the world leader. It will give the industry the foundation it needs and will turbocharge the Plan for Change,” Starmer said in a statement. “That means more jobs and investment in the UK, more money in people’s pockets, and transformed public services.”