By Martin Greig, FBUK Communications Director
The Government’s Spending Review this week has set out day-to-day spending on public services and capital investment across this Parliament.
In total, the Government has committed to increase spending by £190 billion and investment by £113 billion. The Chancellor has called it a “Labour choice” that will put Britain on a path to “national renewal.”
Departments like health and defence have been prioritised whilst others like the Home Office and the Foreign Office face sizeable cuts to their budgets.
Investment in services like health and defence are vital. Spending here will benefit the country and communities up and down the UK. As will investment in technology, transport and infrastructure. But whilst we welcome this, we are left wondering how these commitments will be paid for.
Less than 24 hours after the announcement, the UK economy registered the largest contraction in GDP for more than two years triggered by a record fall in exports to the US (ahead of the Trump Tariffs), increases to NICs, the Living Wage and ahead of changes to BPR and APR.
A growing economy is central to the Government delivering these spending plans. But our research on the changes to BPR and APR shows this single policy change will contribute significantly to the opposite outcome:
- 208,500 jobs losses
- £14.9 billion reduced economic activity (GVA)
- £1.9 billion tax loss
Since last Autumn’s Budget half of family business owners have paused or cancelled investment and a quarter reduced headcount or shelved recruitment plans.
Businesses grow the economy but their confidence, ability and willingness to invest and recruit have been sapped by the choices made by the Government.
There is also mounting speculation the Office for Budget Responsibility will again have to downgrade its forecast for UK economic growth. And, in the absence of growth, the Government will be left with little alternative but to make unpalatable choices … the most likely of which will be to raise taxes, again.
Short of the Government breaking manifesto commitments to not increase income tax, employees national insurance or VAT, it is likely the Government will again turn to marginal areas of business taxation which have the potential to do enormous damage without full consideration.
The one area in which we absolutely support government is its priority to deliver economic growth and improve the lot of working people around the country. We support this completely – as do private and family business owners across the country. But bad policymaking that hinders Britain’s private and family-owned businesses will not achieve this outcome.
Which leaves us, and others, speculating that businesses could be facing another round of tax increases in the Autumn.