What are the Chancellor’s options? A SEC Newgate panel discussion on the upcoming Budget.

Last night, SEC Newgate hosted a lively and insightful panel discussion on the upcoming Budget, with a star-studded cast, including tax policy expert Dan Neidle, JM Finn’s Investment Director, Lucy Coutts, and Stephen Bush from the Financial Times – and chaired by our very own Allie Renison.  

The focus of the discussion was to look at the Chancellor’s options and the likely impact on business and, specifically, looking at the immediate question of how the Chancellor should plug the £20-40 billion fiscal black hole (which, given the Labour Party’s unwillingness to address it through spending cuts, will need to be made up almost completely from tax rises).  

The panel were unanimous that the Chancellor should choose broad-level tax rises to address the fiscal gap (e.g. through an increase in income tax). This would be the most effective in terms of raising the revenue required, addressing bond market worries about UK debt and ending ongoing business uncertainty about future tax rises – and doing so in a way that does the least damage to the economy. Dan Neidle even provided a specific suggestion of cutting National Insurance Contributions by 4% and increasing Income Tax by 3%, meaning most working people would not be hit by major tax increases but the government could raise an additional £6 billion.  

However, given the political implications that such a move would have, in terms of breaking Labour’s manifesto commitments, the panel was not in agreement on whether the Chancellor would raise income tax, with Dan Neidle suggesting that the government would instead opt for a “scrabble bag” of various taxes on wealth, pensions and other measures; Lucy Coutts provided the contrasting view that fear of the bond markets would be enough to focus minds in Number 10 and HM Treasury and ensure that they do what is necessary; and Stephen Bush picked a third option, saying he felt the government would come up with a solution that is both politically damaging and insufficient in addressing the fiscal pressures.  

The panel all expressed concerns about the seeming belief from government and the wider Labour Party that sufficient revenue can be raised by only taxing the wealthy (conclusion: this isn’t possible as there aren’t enough wealthy people in the UK to raise the sums required). There was also a discussion about the scattergun briefings in the media on various tax proposals that the government was considering and the damage this was doing to business and investor confidence.  

This developed into a broader discussion about the current state-of-play in the Starmer government. Stephen Bush, in particular, was vocal about the lack of a clear strategy at the top, Starmer’s inability to resolve competing interests and a government that has become paralysed by fear and lack of political direction. Dan Neidle and Stephen Bush also noted that despite talking a good game on growth, the government had shown that it was not prioritising it through its revealed preferences (in tax, legislation or regulation), often sidetracked by the wider concerns of the Parliamentary Labour Party. Dan Neidle had suggested that the government had adopted the Meat Loaf theory of growth - “it would do anything for growth, but it won’t do that” (typically, whatever business was asking for in any particular moment).  

Given how well regarded both Stephen and Dan are by the Labour Party and government officials, some of these criticisms may have come across as particularly damning. The conversation continued with various questions from the audience on the impact of various tax changes on business and on the quality of analysis being done by HM Treasury and given to Ministers. It was a discussion high on energy and insight – although perhaps a little low on optimism.