Rachel Reeves urged business chiefs to judge her on her ability to deliver economic growth as she faced claims she was treating firms as a “cash cow” by hiking taxes.
The Chancellor acknowledged she had received a lot of “feedback” over the Budget, which included £40 billion of tax increases, but insisted no-one had presented a “credible alternative” to her plan.
In an attempt to reassure firms she would not repeat the tax raid, Ms Reeves told the Confederation of British Industry (CBI) annual conference the Budget had “wiped the slate clean” and public services would now have to live within their means.
Her appearance at the conference in central London followed public criticism by the CBI’s chief executive Rain Newton-Smith and chairman Rupert Soames over the increase in hiring costs caused by rising minimum wage rates and a £25 billion annual increase in employers’ national insurance contributions (NICs) announced in the October 30 Budget.
The Chancellor said: “I’m not immune to the challenges that businesses face, including the challenges from higher taxes. But the alternative was instability hanging over us for another year.”
Ms Reeves told bosses at the conference: “I’ve had lots of feedback on the Budget, but what I haven’t heard is any credible alternative to what I did to put our public finances on a firm footing.”
But she insisted that “businesses can now be certain that we’re never going to have to do a budget like that again” and “public services now need to live within the means that we’ve set”.
The Chancellor insisted that stabilising the public finances and increasing investment would create the conditions for growth, along with measures such as the Government’s promised planning reforms.
“I want you to judge this Government on our number one mission, which is to bring growth back to the UK economy,” Ms Reeves said.
“We can’t do that overnight. If I promised that during the election campaign, if I promised that in my first couple of months in the job, you’d say that’s unrealistic.
“But over this Parliament we’re going to return investment, we’re going to return growth to the economy, because in the end that’s the only way to ensure that Britain is competitive and to ensure that we punch our weight in the world and to improve living standards for working people and to properly fund the public services that I want to see improved as well.”
But business leaders sounded the alarm over the damage the increase in NICs would do to jobs, growth and investment.
Ms Newton-Smith said: “The rise in national insurance, the stark lowering of the threshold, caught us all off guard.
“Along with the expansion and the rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill, they put a heavy burden on business.”
A CBI survey of 266 firms found 62.4% were likely to reduce the number of new hires as a result of the NICs increase, while almost half – 48.1% – said they would reduce their current headcount.
Mr Soames said: “There is no doubt here that in this Budget business has been milked as the cash cow.”
He added: “At the moment, there are doubts that the dots of Government policy join up.
“This week, the Department for Work and Pensions is going to produce a paper setting out actions to help get a meaningful number of the nine million (jobless people) back into work.
“But at the same time, we have a Budget which makes employing people, particularly the young, part-time and low paid, much more expensive.
“And we have an Employment Rights Bill which makes employing people much more risky and an adventure playground for lawyers.”
Meanwhile, the boss of Hobnob biscuit maker McVitie’s parent company Pladis said it is getting “harder to understand” the case for investing in the UK amid too much Government focus on new industries at the expense of existing ones.
Salman Amin said: “What strikes me is that in the race to grow, we seem to be turning our backs on the industries which have built Britain for decades.”
Shadow chancellor Mel Stride said: “Labour’s national insurance jobs tax will punish businesses across the country – making it harder for them to create jobs, driving down wages and discouraging investment.
“Thanks to Labour’s choices, independent forecasts are predicting growth slowing, inflation rising and borrowing soaring.
“It is clear all Rachel Reeves has delivered so far is a litany of broken promises.”