Budget tax rises will make it harder to hire, says CBI

Tax rises in the Budget have made it more difficult for firms to “take a chance” on hiring people, according to one of Britain’s most prominent business groups.

In a speech at its annual conference on Monday, the boss of the Confederation of British Industry (CBI) said the changes meant businesses were facing “a tough trading environment that just got tougher”.

On the fringes of the event, one executive said it was “becoming harder to understand” the case for investing in the UK.

The government said, however, that “difficult choices” had been made in a bid to “repair the public finances”, but it was determined to work with firms.

In her first Budget as chancellor last month, Rachel Reeves announced a near-£70bn increase in public spending, partly funded by increases in taxes on employers such as National Insurance.

While rises in the minimum wage and workers’ rights reforms have been praised by unions and workers’ groups, bosses have hit out, saying that their businesses are being weighed down by multiple changes at once.

In her speech to the CBI’s conference, Ms Newton-Smith argued that “tax rises like this must never again simply be done to business”.

At the conference, Salman Amin, chief executive of McVitie’s bakery products’ parent company Pladis, said that most of its investment in the last decade or so has come to the UK.

But he added: “Going forward, it’s becoming harder to understand what the case for investment is.”

In her earlier keynote speech, Ms Newton-Smith referred to a recent survey by the group, which found almost two-thirds of 185 companies who responded think the Budget will damage UK investment.

“When you hit profits, you hit competitiveness, you hit investment. You hit growth,” she said.

Stuart Paver, chair of Pavers Shoes, an outlet shop chain with more than 190 stores in the UK and Ireland, told the BBC the tax changes announced in the autumn would cost his business £4.2m and would “hinder expansion”.

“We’re opening about 10 to 15 stores a year at the moment, and that plan has been slowed down at the moment as we go through the uncertainty,” he told BBC Radio 4’s Today programme.

Last week, a group of major retailers, including Tesco, Amazon and Next, also wrote to the chancellor to warn her of the impact tax changes would have.

Firms such as Sainsbury’s and Marks & Spencer have said they will face a huge jump in costs and they may need to increase prices for customers.

However, others have said that asking multimillion-pound companies to pay more in taxes was one of the fairer ways to improve funding for services like the NHS.

“No-one is questioning that we need to see the tax rises to really help fund our public services,” Ms Newton-Smith told the Today programme.

But she said that firms had been taken aback by the lowering of the threshold for the payment of National Insurance, and that the pain was “really serious”.

In her speech, she urged government to consider a number of reforms to improve economic growth, such as giving companies more flexibility around how they spend money using the apprenticeship levy.

She also said the chancellor should look at updating business rates for commercial property, as well as simplifying the planning system.

Conservative party leader Kemi Badenoch told the conference she was concerned that the tax burden on businesses, and smaller ones in particular, was still increasing.

“The new government believes that invisible businesses can absorb these costs, but it is everyday people who bear the brunt, either in higher prices or lower wages, sometimes both,” she said.

She added that a “proper diagnosis” of the UK economy was needed in order to “unleash the power of business” in the face of rapid technological change, an ageing population and “aggressive” competition from other countries.

According to newspaper reports, the chancellor will use an opportunity at the conference to respond to criticism of Labour’s first Budget in 14 years.

The Guardian suggests she will tell business leaders that they have offered “no alternative” to her plans, and that it was necessary to “wipe the slate clean” following the General Election.

During the campaign period, Labour had promised that “working people” would not see higher taxes in their payslips.

A government spokesperson said the pledge meant that it had had to take “difficult choices to repair the public finances and to put public finances on a firmer footing”.

“Despite the difficult inheritance, the government is determined to go for growth and to work in partnership with businesses to invest in Britain’s future so we can make every part of the country better off,” they added.