Chancellor concedes tax hikes may hinder growth

Rachel Reeves has acknowledged that tax increases could negatively affect economic growth while addressing the British Private Equity and Venture Capital Association summit. The Chancellor said: “I do recognise that tax policy does impact economic growth. One of the reasons why I spoke about the need for spending restraint at Cabinet yesterday is that I recognise [that] to make sure that the numbers add up it’s not just what you bring in, it’s also what you’re spending. But crucial for all of this is economic growth. If you can grow the economy, you can make these decisions around tax and spend so much easier.” The Chancellor’s comments come after the head of the Confederation of British Industry (CBI) called on her to ditch Labour’s manifesto commitment not to hike taxes on working people. Commenting on the move, Matthew Lesh in the Telegraph said the argument was “self-serving yet understandable” but the approach from the CBI “is strategically short-sighted and economically misconceived” as it would simply feed into Britain’s economic doom-loop.

CMA takes on the UK’s scale-up challenge

The chief executive of the Competition and Markets Authority writes in City AM on the challenge of keeping UK scale-ups in the country. Sarah Cardell says new analysis from its Microeconomics Unit suggests the answer is nuanced. Competition can drive investment, particularly for start-ups reliant on access to finance. However, heavy regulation may hinder venture capital for scale-ups. Mature firms invest based on market competition, while global superstars face mixed effects from trade. Cardell says the regulator will be talking to investors, businesses, policymakers and academics over the coming months with the view to helping the UK find ways to “unlock opportunities for British scale-ups to become globally consequential firms.”

Britain’s £5bn digital tax dilemma

The UK could lose over £5bn if it succumbs to Donald Trump’s pressure to eliminate the digital services tax on tech giants like Amazon. This tax is expected to raise between £4.4bn and £5.2bn from 2024 to 2029, sufficient to train 128,000 nurses, according to TaxWatch analysis. Trump has threatened tariffs on countries imposing such taxes. However, data from HMRC reveals that 37% of companies liable for the tax are not based in the US. Lib Dem MP Victoria Collins stated: “The public knows tech giants need to pay their fair share.”

Wetherspoons boss slams tax disparity

Tim Martin, CEO of Wetherspoons, has condemned the disparity between taxes on supermarket and levies on pubs. He stated that pubs pay 20 times more in business rates per pint than supermarkets, with taxes accounting for 28p of a £5 pint compared to just 1.5p for supermarkets. Martin said: “This tax disparity is harming businesses and high streets, but also the social fabric of the nation.” The British Beer and Pub Association’s Emma McClarkin called the situation “absolutely heartbreaking,” urging reforms to business rates and beer duty.

UK life sciences investment in decline

The UK is struggling to attract global investment in its life sciences and pharmaceutical sectors, according to a report from the Association of the British Pharmaceutical Industry. The report, conducted with PwC, reveals that foreign direct investment fell to £795m in 2023, down 58% from £1.9bn in 2017. Merck’s decision to cancel a £1bn investment in a London research centre highlights the industry’s concerns. Eli Lilly and AstraZeneca have also paused investments, citing an uncompetitive environment. Eli Lilly’s CEO stated: “urgent action” is needed to reverse the decline.

Government tackles business rates cliff edges

The Government is addressing ‘cliff edges’ in business rates that disproportionately affect small firms. The Treasury is considering changes to small business rates relief, which currently offers a 100% discount for properties valued at £12,000 or less. This relief tapers for properties valued between £12,000 and £15,000. The proposed reforms aim to eliminate sudden increases in bills when businesses expand. Labour is contemplating a gradual tax increase model similar to income tax. The Chancellor faces pressure from large retailers concerned about potential rate hikes affecting 4,000 stores.

Reeves tells investors she wants to ‘take out more regulators’

The Chancellor has announced plans to reduce the number of regulators in the UK to stimulate economic growth. Speaking at the British Private Equity & Venture Capital Association summit, Rachel Reeves said: “I want to take out more regulators; there’s still too many.” She highlighted recent actions, including the dismissal of the Competition and Markets Authority chair and constraints on the Financial Ombudsman Service. She pointed to the need for regulatory reforms to facilitate business, particularly in the Department for Environment, Food and Rural Affairs, now led by former City minister Emma Reynolds.

FCA grants card providers power over contactless limits

The Financial Conduct Authority (FCA) is consulting on proposals to allow card providers, such as American Express and Barclaycard, to set their own limits on contactless payments, currently capped at £100. David Geale, FCA’s executive director of payments and digital finance, said: “It’s the right time to let firms tailor contactless payments to fit their customers’ needs.” While most companies are expected to maintain the £100 limit initially, the FCA aims to enhance flexibility and innovation in payment methods. The consultation period will conclude in just over a month.

Mervyn King concerned about high debt levels

Mervyn King, a former Governor of the Bank of England, has warned that the UK Government faces a “real challenge” in managing fiscal policy as national debt continues to grow. Speaking to Lords at a committee hearing on Wednesday, King said the UK was less able to deal with a financial crisis now than it was before the 2008 crash. “Some people have drawn comfort from the fact that the recent rise in long term interest rates has been true across the G7. But that simply means that we are all in the same mess, rather than just the UK,” King explained. Although the UK could “cope” in a future crisis, King said: “I think we are not in a comfortable position.” The UK is set to pay over £105bn to service its debt this year with the debt-to-GDP ratio now standing at 96.1%.

Reeves limits departmental spending ahead of Budget

Rachel Reeves has announced restrictions on access to the £9bn Treasury Reserve for government departments. The decision aims to ensure departments maximise savings before seeking emergency funds. The Chancellor stressed the need to adhere to borrowing rules, stating: “I do not think there is anything progressive about spending £100bn a year on paying off debts accrued by previous governments.” The upcoming Budget, scheduled for 26 November, will outline tax and spending plans amid pressures to boost economic growth while managing public finances. Estimates suggest Reeves may need to find between £25bn and £50bn to meet her targets.

Students struggle with financial basics

New research from Pay.UK reveals that incoming university students are ill-prepared for managing their finances. Nearly 50% of young adults feel stressed about their financial situation, with 40% feeling unprepared. Only 35% have set a personal budget, and just 16% feel confident in their financial management. Graduates advise current students to prioritise financial understanding, with over 45% saying they wish they had monitored their spending better.