Rachel Reeves warned ‘jobs tax’ will destroy business confidence

The Chancellor gave her strongest signal yet employer national insurance contributions will be hiked to raise billions of pounds in her maiden Budget on Oct 30.

Ms Reeves insisted bosses “get” that she must increase tax receipts to balance the books.

But critics accused Labour of “attacking wealth creators” and sending a signal of “higher taxes on jobs and investors”.

Tory MP Neil O’Brien added: “Not that long ago Rachel Reeves was slating the idea of increasing employers national insurance as a “jobs tax” which would ultimately just come out of the pockets of normal people, and the Office for Budget Responsibility agrees that the cost will just be passed onto workers anyway.

“Combined with Labour plans to borrow and spend more and other plans they are threatening, lots of this will already be putting off people from investing in the UK”.

Laura Trott, Shadow Chief Secretary to the Treasury said: “The Chancellor has chosen Labour’s first investment summit to sow further uncertainty and chaos for businesses who are now braced for Labour’s Jobs Tax.

“Regardless of what they say, it’s obvious to all that hiking employer National Insurance is a clear breach of Labour’s manifesto. Rachel Reeves herself previously called it anti-business and we agree, it is a tax on work that will deter investment, employment and growth, and the OBR says it will lower wages.”

Andrew Griffith, Shadow Secretary of State for Science, Innovation and Technology: “Businesses coming to London for the Investment Summit will have seen the clear signal the Labour Government has sent, more business regulation, higher taxes on jobs and investors, and Labour ministers, who do not understand business, attacking wealth creators.

“We will continue to hold the Government to account for its actions.”

But the Chancellor said: “Businesses want two things. They want a competitive tax system and competitive regulation and planning and all the rest of it.

“If we come out of that Budget and there’s not a serious plan to balance day to day spending through tax receipts, get debt down as a share of GDP, I’m afraid businesses will continue to look at Britain and say we’re not serious.

“So, I don’t regard it as a sort of dilemma between returning the economy to a path of stability on the one hand and attracting investment on the other.

“Unless you put Britain on a stable economic and financial path, we’re not going to be able to get that investment in.

“That will mean some difficult decisions, including on taxation.

“Businesses get that. They know that we’ve got to be able to pay for day to day spending through tax receipts.”

The Chancellor admitted the upcoming Budget will be “tough” and there will be a “difficult balancing act”.

She said: “I don’t think it’s any surprise to the British people that the first Budget of this new Labour Government is going to be tough – to get public services back on a firm footing, to get our public finances on a stable path, whilst also trying to ensure that working people are not going to be paying more and more of their hard earned money in taxes.

“So it’s a difficult balancing act. But I think the public understand the scale of the challenge that we are facing.

“We were really clear in our manifesto that we weren’t going to increase the key taxes paid by working people – income tax, national insurance and VAT.

“And on the business side, our commitment that we would cap corporation at 25%, which is the lowest in the G7, and we will stick to the commitments we made in our manifesto.

“But you know that there’s a £22bn black hole over and above anything that we knew going into the election.

“The precondition for bringing investment into a country is economic and fiscal stability.

“So we are going to need to close that gap on what the Government is spending and what we’re bringing in through tax receipts.

“Decisions will need to be made.”

Prime Minister Sir Keir Starmer on Monday confirmed an additional £63 billion will be invested in the UK economy.

This includes an extra £1.1bn boost to Stansted, expanding the existing terminal by a third, opening up new routes to holiday destinations across Europe.

Construction is expected to begin early next year.

Spanish energy company Iberdrola also confirmed it will double its £12bn investment to £24bn, with £4bn set to be spent on a huge wind farm off the Suffolk coast

Sir Keir said in a speech to the International Investment Summit, that it was “an age of great possibility” with a “huge revolution in digital technology, in clean energy, medicine, life sciences, each with a competitive potential to fundamentally change the way we live and the way that we work”.

The summit, at the Guildhall in the City of London, was compered by Bridgerton star Adjoa Andoh, with guests invited to an exclusive reception at St Paul’s Cathedral, attended by the King and featuring a performance from Sir Elton John.

After a bruising few weeks of headlines dominated by turmoil in Number 10 and a row over freebies given to Cabinet ministers, Sir Keir promised to “think in years” rather than “the days or hours of the news grid”.

In his keynote speech he said: “We’ve got our problems, of course we have. As I’ve said, our public services need urgent care, our public finances need the tough love of prudence – challenges we can’t ignore.

“Because we know, just as every leader here knows, that those early weeks and months are precious, and no matter how many people advise you to ignore it, that you must run towards the fire to put it out, not let it spread further.”

With Rachel Reeves’ first Budget on October 30 and the prospect of tax rises to help repair the public finances, Sir Keir stressed the importance of growth in providing extra cash for the Government.

It marks a change in tone after the Government had faced criticism for being too gloomy about the state of the economy and public finances.

The Prime Minister said growth was “the only way to deliver the mandate for change we won” at the general election.

“Growth is higher wages. Growth is a more vibrant high street. Growth is public services back on their feet, it’s less poverty, more opportunity, more meals out, more holidays, more precious moments with your family, more cash in your pocket.

“And, of course, for any business it means a bigger market, higher demand, a more secure and prosperous future.”

Sir Keir said it is “time to upgrade the regulatory regime” as he pledged to “rip up” bureaucracy holding back investment.

He said the Government will “make sure that every regulator” in the country takes growth “as seriously” as businesses.

The build-up to the summit was overshadowed by a £1 billion investment by P&O Ferries owner DP World being put in jeopardy following Transport Secretary Louise Haigh’s suggestion consumers should boycott the ferry company following the fire-and-rehire scandal.

But on Monday the firm confirmed its plan to expand the London Gateway container port.

Other investments announced on Monday included £1.1 billion by Manchester Airports Group to expand Stansted.

Sir Keir said it was “a great moment to back Britain”.

But the challenges facing Sir Keir were underlined by former Google boss Eric Schmidt during a panel discussion with the Prime Minister.

“I was shocked when Labour became strongly in favour of growth,” he said.

He warned the Prime Minister that problems with the planning regime and regulation were “killing you”.

“The cost of capital and the delay is killing you, and furthermore you’re not going to achieve your 2030 energy goal, which is laudable, without fixing this,” he said.

“You have a tactical leadership problem to achieve this and I think you can pull it off, but you have to figure out a way to get control.”