Rachel Reeves on a visit (Image: Getty)
Rachel Reeves has been warned she faces nearly a 50% chance of further tax rises or spending cuts following her spring statement.
A surge in borrowing costs wiped out the Chancellor's narrow breathing space after her maiden Budget in October, a cushion she helped rebuild by slashing welfare spending.
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But Paul Johnson, director of the Institute for Fiscal Studies, accused the Chancellor of leaving herself “at the mercy of events” once more.
He said: “All of that adds to uncertainty around policy. We can surely now expect six or seven months of speculation about what taxes might or might not be increased in the autumn.”
Business bosses slammed Rachel Reeves for failing to avoid the “cliff edge” that firms face from next month from tax hikes.
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The Chancellor made no changes to a raft of measures set to come into force from April 1, including a rise in business rates.
Tim Sarson, head of tax policy at KPMG UK, said: “Businesses will be breathing a little easier after the Chancellor did not spring any new tax rises on them in Wednesday's announcements as was predicted.
“With the increases to the national minimum and living wages, and the employers’ national insurance (NICs) about to kick in, businesses are already having to tighten their belts and make some tough decisions. The Office for Budget Responsibility (OBR) halving this year’s growth forecast from 2% to 1% will also not have helped.
“Following last year’s downbeat narrative, businesses will be hoping the government will beat a more optimistic drum for the UK, despite the challenges.”
The OBR spending watchdog warned the increase in employer NICs is likely to be contributing to “falling recruitment and rising redundancies”.
Employers’ NICs will rise from 13.8% to 15%, and the threshold at which employers start paying NICs will drop from ￡9,100 to ￡5,000.
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The Government revealed during the Budget in October that it would be increasing the National Living Wage by 6.7% from next Tuesday.
Ms Reeves confirmed the move during her spring statement on Wednesday adding that three million people would see their pay rise from ￡11.44 to ￡12.21 an hour
Meanwhile some companies will see their business rates nearly double when relief is slashed to 40% from 75%.
Emma McClarkin, CEO of the British Beer and Pub Association, said: “The spring statement was the perfect chance to sow the seeds of growth but Government missed the opportunity, has not listened to business, and we can now expect to see prices rise, jobs at risk, and growth downgraded.
“For a Government whose mission is growth, there is an alarming lack of a plan to boost the economy, given they’ve buried brewers and pubs under mountains of regulations, rates, and taxes.
“We now predict that, following the Spring Statement and taking into account the new costs coming into effect from April, the sector will now face an additional ￡70 million per month, the equivalent of 5,700 jobs per month. We can expect to see pubs close at a faster rate which will risk growth and jobs and hurt the communities who rely on them.”
The Government has said it will reform the current business rates system, and on Wednesday said it will publish an interim report on this during the summer.
But no details of the proposed changes are set to be announced until the next autumn Budget later this year.
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John O’Connell, chief executive of the TaxPayers' Alliance, said: “The excruciating sight of a chancellor facing the consequences of her own actions will not provide any schadenfreude for businesses facing surging tax bills, job-seekers seeing opportunities evaporate, and farmers fearing for their livelihoods.
“Rachel Reeves has staked her credibility on fixing the public finances, delivering growth and protecting household finances, yet her devastating autumn budget means she has completely lost the confidence of taxpayers in her ability to deliver.
“While the chancellor is right that planning reforms could boost the economy, if she and her colleagues do not urgently change course on taxation and employment laws then the economic picture will remain bleak for many years to come.”
Shadow chancellor Mel Stride described Ms Reeves as a “gambler” who has “destroyed” livelihoods and “clobbered” businesses.
Hitting back, Ms Reeves said: “The world is changing and no-one can be in any doubt about it, but the Conservative Party is stuck in the past, divided, out of touch and carping from the sidelines.
“They have no plan, no plan to kickstart growth, no plan to fix our public services, no plan to keep our country safe. The only plan for change they are working on is to change their party leader, and we can’t blame them for that.
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“So, if they have no plan, let me remind them about ours. The minimum wage up, real wages up, housebuilding up, NHS investment up, investment in our schools up, investment in our roads up, defence spending up.
“Every single one of those policies opposed by the parties opposite, opposed by the Conservatives, opposed by Reform, opposed by the SNP, opposed by the Liberal Democrats and opposed by the Greens. It’s the anti-growth coalition.
“They are the blockers. We are the builders, securing Britain’s future, protecting working people and delivering change.”