CBI Boss Urges Rachel Reeves To Rethink Labour Tax Pledges As Economic Pressures Mount

The head of the Confederation of British Industry, Rain Newton-Smith, has called on Chancellor Rachel Reeves to reconsider Labour’s pledge not to raise taxes on working people, amidst concerns over the worsening economic outlook. Reeves faces pressure to deliver her upcoming budget statement without increasing the core taxes Labour promised to protect, a move that is proving ever more complicated given the fiscal challenges that have emerged since the general election.

Labour’s manifesto made a clear commitment to avoid raising the three principal sources of revenue for the Treasury: income tax, national insurance, and VAT. However, in a notable intervention through the Guardian, Newton-Smith urged the government to abandon what she termed “slavish adherence” to outdated tax promises, highlighting that global economic and geopolitical shifts mean that new solutions are required. “When the facts change so should the solutions,” she argued, making the case for long-term reform over short-term caution.

The CBI leader warned that with corporate taxes already stretched, the Chancellor cannot continue to target businesses to plug gaps in public finances. Newton-Smith advocated for strategic tax reforms, including overhaul of business rates, review of VAT thresholds for small companies, and changes to stamp duty.

The pressure comes as the Office for Budget Responsibility is forecast to downgrade its growth prospects in light of revised productivity estimates. This, coupled with expensive government U-turns on welfare and winter fuel policies, has left the Treasury seeking an estimated £20bn to £30bn in additional revenues over the next five years to meet fiscal rules. Economists from the Resolution Foundation concurred, emphasising the difficulty of raising this sum while honouring the commitment not to increase the taxes that form the backbone of government income.

Despite these warnings, Reeves has reiterated her intention to maintain Labour’s pledges, with the Treasury assuring that payslips for working people will be protected and no rises will be made to income tax, employee national insurance, or VAT. Newton-Smith also voiced concerns with the government’s proposed employment rights bill, arguing that elements of the legislation could lead businesses to hesitate on hiring due to greater cost and complexity.

The debate over tax and regulation comes amid political upheaval, including a government reshuffle aimed at prioritising growth and the resignation of a key employment rights advocate. Unions remain anxious for firm commitments to workers’ rights legislation, while business leaders and economists alike argue that the economic context has evolved significantly and needs responses based both on present realities and future challenges.