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Any significant tax increase proposed by Rachel Reeves Should be “temporary” and combined with reforms to help “hurt” businesses at the last minute BudgetSir tony blairThe think tank has warned.
a report of Tony Blair Institute (TBI) has been called chancellor Move beyond “caution in the government’s first year in office” to “getting businesses back on track” in its upcoming November 26 budget.
Ms Reeves has already dashed expectations of higher taxes by refusing to keep Labour’s manifesto promises not to increase income tax, national insurance, etc. tub,
TBI emphasizes that any such measures must be accompanied by bold, growth-enhancing, pro-trade reforms.
He argues that these are necessary to “break Britain’s destructive tax-and-spend cycle” and allow the government to scale back tax increases as the economy improves.
It rejected the government’s proposal to give workers “day one” protection against unfair dismissal, instead recommending a six-month qualifying period.
In its paper, the TBI supported “decisive” action, such as increasing a major revenue-raising levy rather than more incrementalism that “causing pain but rarely speeding up”.
“If the Chancellor opts for a major revenue-raising move – particularly a manifesto-violating increase in income tax or value-added tax (VAT) – she should make clear that this is temporary and conditional: a short-term measure to stabilize the public finances, not a permanent change in direction,” the TBI said.
Once growth strengthens and public service reforms begin to deliver results, taxpayers Must watch “Targeted tax cuts before elections”.
The TBI argued that Ms Reeves should announce “a big initial wave of pro-business reforms” in the budget.
Welcome reforms already implemented by ministers, such as planning, have often been “offset” by “contradictory measures” elsewhere, such as increases in Employer National Insurance.
“Businesses, still hurt by last year’s tax rises, want a clear signal that the government will prioritize enterprise, sustainability and delivery,” Labour’s former prime minister’s think tank said, adding that the Chancellor should “chart a course for national renewal” that would get them “back on track”.
“Achieving this will require difficult, politically costly decisions that signal a clear change in direction and a move beyond the caution of the government’s first year in office.”
The TBI warned that planned changes to migration policy and employment rights risk damaging the UK’s flexible job market.
It urged ministers to retain the five-year route to permanent settlement for skilled worker visas, instead of requiring migrants to spend a decade in the UK before applying.
Other TBI recommendations include:
- Expanding the reach and reducing costs of the Global Talent Visa, introducing a new “technical excellence” visa for engineers, founders and researchers, and creating a permanent key worker visa for shortage occupations such as construction and caregiving;
- simplifying employment protection for high earners;
- replacing fuel duty with road pricing;
- Abolishing stamp duty on shares and introducing government loans to spread the cost of stamp duty on property transactions over 20 years.
To tackle the rising benefits bill, the think tank said ministers should create a “preventive welfare” program that invests planned future welfare payments into NHS treatments such as talking therapy, digital physiotherapy and new obesity treatments such as Ozempic.
The Labor government sought to limit entitlements to personal independence payments (PIP) earlier this year, but its welfare reforms were slowed after a backbench rebellion.
Tom Smith, TBI economic policy director, said: “This Budget demands a clear break from last year – a move that makes growth the objective of government, not one of many objectives.
“The Chancellor accepts that she has difficult choices to make. She cannot satisfy the market, the party, business and the voters simultaneously. The only way to do this over time is to get Britain back on the path to growth – and that means a new deal between government and business.”
“A credible Budget can’t just raise taxes – it must raise Britain’s focus. The Government needs to show fiscal discipline, but also the confidence to support business.
“Only a bold, pro-enterprise plan can raise living standards, strengthen public finances and give the government fiscal space to make the changes voters want. Progressive policy demands a pro-business growth plan today for tomorrow.”
Asked about the TBI’s recommendations, the Treasury pointed to the Chancellor’s pre-Budget speech on Tuesday, in which she said she would “do what we can to protect families from high inflation and interest rates, to protect our public services from a return to austerity, and to ensure that the economy we pass on to future generations is secure and that debt is under control.”