With UK Chancellor Rachel Reeves refusing to rule out tax rises in her speech ahead of the Budget on 26 November, ICAEW has reiterated the need to avoid any new tax increases on business to avoid further restrictions on growth.

With tax increases seemingly inevitable, the institute is urging the government to phase in any further increases to give businesses time to adapt.

In her speech, the Chancellor set out the various conditions that are putting public finances under strain, such as US tariffs, the Liz Truss mini-budget and a “rushed and ill-conceived Brexit”. She said that rising global borrowing costs and the constant threat of tariffs and volatile supply chains are having a detrimental effect on business sentiment and investment.

Describing the Budget as “a growth Budget with fairness at its heart”, the Chancellor stopped short of announcing any concrete policies. However, she mentioned the need to tackle inflation, encouraging economic growth and tackling the ongoing cost of living crisis. She particularly emphasised the need to increase productivity, including infrastructure investment, skills and inward investment. 

However, much of her speech was given over to sentiments seemingly designed to pave the way for tax rises in the Budget. The Chancellor spent several minutes talking about the need to bring down the national debt, and that more borrowing would not be the answer. “The less we spend on debt interest, the more we can spend on the priorities of working people,” she said.

She went on to argue that the government must continue to invest in public services, and that austerity was not an option. The Chancellor also added that increases in productivity and efficiency within the public sector will contribute to maintaining public services.

Addressing the policies of her political opponents, the Chancellor used the opportunity to reiterate that spending cuts would lead to a reduction in public services. “Any Chancellor from any party would be standing here today facing the choices that I face.”

Reeves also tried to talk up the economic opportunities in the UK. "We are a country with considerable economic strengths, an open, trading economy, a global hub for cutting-edge industries from AI to biotech, with world-leading universities and scientific institutions and a talented and committed workforce.”

Reeves suggested that she intends to focus on the government’s industrial strategy and accelerate planning reforms. She also talked of cutting government spend on consultancies, getting rid of bureaucratic quangos and regulators and driving efficiency through AI and digital technologies.

In an attempt to manage expectations around the forthcoming Office for Budget Responsibility (OBR) forecasts, Reeves warned that these are “a look in the rear-view mirror” and not visions of the future.

Ultimately, the Chancellor made it clear that UK citizens will need to contribute more, saying, “Each of us must do their bit.”

In response, Iain Wright, ICAEW’s Chief Policy and Communications Officer, said that the Institute has consistently urged the Chancellor not to increase business taxes for the rest of this parliament. This would give firms certainty, he said.

“If tax increases are absolutely necessary, as she alluded to, then a new approach to fiscal policy and planning is needed. It would be a mistake later this month to implement big changes in one go, as demonstrated by the fallout from the previous Budget.

“Recent experience shows a big bang approach to tax rises leaves businesses in shock and stops investment, recruitment and, therefore, economic growth in its tracks. Instead, the government should consider phasing-in any major tax rises over several years to mitigate the adverse economic consequences, while minimising the impact of these changes on people and businesses, and by extension, the economy.”