Alan Stewart

It was a defensive statement from Chancellor Rachel Reeves, who set out to show the Labour party was ‘on the side of working people’ and pushing the narrative of positivity from the Economic and Fiscal Forecast from the Office for Budget Responsibility (OBR) findings in relation to future growth.

There was no unexpected, added pain, however, there was also very little in the way of instant relief for businesses and individuals who feel enormously challenged by the current economic climate.

Shadow Chancellor Mel Stride said no further tax increases would be cold comfort to the millions across the country ‘waiting with trepidation for the new tax year’ and this is likely to be the case.

Business confidence is at a low ebb with challenges around national insurance and business rates and, without any confirmation to the contrary, this may only worsen in the next six months ahead of the Autumn Budget.

The lack of tax announcements increases the spotlight on the changes announced in the Autumn and turns the eye to ‘what’s next’.

The significant increase in employer’s NIC will happen – a huge increase in the tax burden for UK business – and the imposition of inheritance tax on business and agricultural assets for the first time in decades is here to stay.

Will we see the government break manifesto pledges in the Autumn? Expect yet more freezes in tax thresholds, which will increase the tax burden on many by the effect of fiscal drag, and perhaps some restrictions to reliefs and tax efficient wrappers such as ISAs.

One way of sticking to the manifesto promise of not increasing income tax, national insurance, corporation tax and VAT would be to introduce a new tax – the discussion about a wealth tax has attracted some attention in recent weeks and when recently asked about benefit cuts, Dianne Abbott said: “I would introduce the wealth tax. If you brought in a wealth tax of just 2% on people with assets over £10 million, that would raise £24 billion a year. That’s what I would do.”

What we need is a period of stability around tax and the landscape … stability allows businesses owners to plan for the future.

The slashing in half of the OBR’s forecast for growth in 2025 to 1% was undoubtedly a setback for the Chancellor, as she set out her bid for ‘long-term sustainable growth’.

Her glimmer of hope was the OBR prediction for growth next year and every year thereafter - upgraded to 1.9% in 2026, 1.8% in 2027, 1.7% in 2028, and 1.8% in 2029.

She said the string of cuts outlined in the Commons today was necessary in the face of global economic challenges– with a renewed focus on defence spending, the creation of thousands of social houses and ‘building resilience to shocks in this more uncertain world’.