British business group hits out at Labour's tax hikes

LONDON: Confederation of British Industry (CBI) has criticised the Labour government's recent tax hikes on businesses, warning that the 'heavy burden' could lead to cuts in hiring and investment.

The government's maiden budget last month included a significant tax increase for businesses, which Finance Minister Rachel Reeves said was necessary to repair UK public finances and services following the July election win.

"Tax rises like this must never again be simply done to business," said Rain Newton-Smith, Chief Executive of the CBI, at its annual conference.

Reeves is expected to tell the conference on Monday that she is unlikely to repeat the "difficult decisions" in the budget and will work with businesses to achieve sustainable economic growth.

Businesses have been hit hard by the increase in employers' national insurance contributions, which is expected to generate £25 billion ($31 billion). Newton-Smith said the hike caught companies "off guard".

Prime Minister Keir Starmer's government had pledged not to raise taxes on "working people" in its first budget after 14 years of Conservative rule. However, there are concerns that the tax measure will impact employee salaries as companies seek to recover costs.

"The budget just made it harder for our firms to take a chance on people," Newton-Smith said. "Across the board, in so many sectors, margins are being squeezed, profits are being hit by a tough trading environment that just got tougher."

No Alternatives

According to excerpts of her speech released to the media, Reeves will tell delegates: "I have heard lots of responses to the government's first budget -- but I have heard no alternatives." She will add that "difficult decisions had to be made," which meant asking "businesses and the wealthiest to contribute more".

Data released on Friday showed that private-sector activity contracted slightly in November, which some analysts attributed to uncertainty ahead of the budget and the decisions made in it.

Labour is also planning major reforms to workers' rights, which could pit unions against businesses. The bill includes key pre-election pledges such as a ban on zero-hours contracts, improvements to sick and maternity pay, and measures to make it harder for employers to sack staff. Other proposals include increased flexibility around working hours and greater protection against sexual harassment in the workplace.

The CBI cancelled last year's annual conference following allegations of sexual misconduct within the lobby group, which led to an exodus of member companies. Some have since returned. Newton-Smith replaced Tony Danker last year, who left over a separate misconduct allegation.

By RSS/AFP