Healey Faces Pressure Over Taxes as Businesses Warn of Inflation and Jobs Risks
With Britain’s public finances under strain, Chancellor John Healey faces competing demands ahead of the Oct.
With Britain’s public finances under strain, Chancellor John Healey faces competing demands ahead of the Oct. 28 Budget: raise taxes to shore up the government’s finances or avoid measures businesses say could fuel inflation and weaken hiring. Firms have urged him to cut taxes to support employment, while financial industry groups warn higher levies could push investment overseas.
The debate comes as the Resolution Foundation says Healey should raise £8 billion to rebuild fiscal headroom it estimates has fallen from £24 billion to £12 billion, partly because of the Middle East war. The think tank has called for tax increases, including measures affecting pensioners, alongside targeted help for people facing cost-of-living pressures.
James Smith, the foundation’s chief economist, warned that public finances were likely to deteriorate substantially. He said delaying difficult choices until next year’s spending review was not the right approach.
Business groups push back
UK firms have told Healey that tax cuts in the Budget are needed to encourage hiring. Financial services leaders, meanwhile, have campaigned against further taxes on banks, arguing that the sector already faces a heavier burden than competitors abroad.
Banks pay a 3% surcharge on profits and a separate levy on certain balance-sheet liabilities and equities, in addition to taxes that apply to businesses generally. Industry representatives say another squeeze could divert investment overseas and undermine the government’s growth ambitions. Unions have pressed for a £9 billion levy on bank profits to help households.
The competing proposals put the burden of repairing public finances at the centre of the Budget debate. Healey has also rejected calls to align capital-gains tax rates with income-tax rates.
Spending plans under scrutiny
The Institute for Fiscal Studies has warned that the Budget needs a clear plan for £35 billion in spending pressures. It says higher inflation linked to the Middle East war could force the government either to provide more funding for existing spending plans or make deep real-terms cuts by the end of the decade.
IFS director Helen Miller said relying on cuts that the government did not intend to deliver would make the Budget “a work of fiction.” The Budget is scheduled for Oct. 28, with the think tank calling for key decisions to be made now rather than deferred to next year.
The Resolution Foundation estimates Healey’s fiscal headroom has shrunk by half, from £24 billion to £12 billion.
