Starmer’s Budget pains grow as welfare push is hit by jobs warning
KEIR Starmer faces further fallout from his government’s first Budget, with the UK prime minister’s latest initiative to reduce welfare spending running up against business warnings about job cuts due to higher taxes.
As Starmer prepares to reveal legislation this week aimed at getting people back in to work and cutting the nation’s £137 billion (S$232 billion) benefits Bill, the head of the country’s most influential business lobby said that businesses are in “damage control” after Chancellor of the Exchequer Rachel Reeves’s tax-raising Budget, and that nearly half are planning to reduce the size of their workforce.
“Tax rises like this must never again be simply done to business,” Confederation of British Industry (CBI) head Rain Newton-Smith said at the lobby group’s annual conference in London on Monday (Nov 25). “Even where the risk isn’t critical, firms that have been through really tough years are now in damage control again.”
The business backlash has been a significant post-Budget headache for Starmer, who came to power in July on a pro-enterprise promise to boost growth and living standards. Instead, consumer and business sentiment has declined as Reeves revealed more than £40 billion in tax rises, a move she blamed on public finances damaged by the previous Conservative government.
The bulk of the money raised at Reeves’ Budget came from an increase to national insurance, a payroll levy, and the scale surprised many firms. Around six in 10 businesses told the CBI that the Budget would not make the UK more attractive for investment, and many said they were not willing to invest, expand or take a chance on new people. The survey was carried out in the days immediately after the Budget and received 185 responses, the CBI said.
It asked more questions in the middle of November, receiving 266 responses. According to that survey, close to half of businesses – 48 per cent – were planning to trim their workforce, while 62 per cent said they would hire fewer people. “When you hit profits, you hit competitiveness, you hit investment,” Newton-Smith said.
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The negative reaction has put Starmer’s Labour government on the back foot. Reeves is also due to address the CBI conference on Monday and will say that there was “no alternative” to her tax hikes, according to pre-briefed remarks reported by The Guardian.
The jobs warning sets up further tension with Starmer’s bid to cut the welfare Bill. On Tuesday, the government is due to reveal legislation that will detail how it plans to get more people back into work, including removing benefits from those who repeatedly refuse training or job opportunities, and by improving job centres and giving more support to people with mental health conditions.
“We will get to grips with the bulging benefits Bill blighting our society,” Starmer wrote in an op-ed for the Mail on Sunday newspaper. “We will crack down hard on anyone who tries to game the system, to tackle fraud so we can take cash straight from the banks of fraudsters.”
That approach fits with how Starmer and Reeves presented Labour as fiscally responsible ahead of the election and in the first weeks of government, but it also risks angering MPs sensitive to cutting back benefits.
Starmer has already faced fierce criticism over his refusal to end a cap on child welfare payments introduced by the Tories, and over Reeves’ decision to scrap winter energy assistance from most pensioners.
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