Small businesses 'hold their breath' ahead of Rachel Reeves' first Budget

As the days tick down to Wednesday, when Rachel Reeves will announce Labour’s first Budget in 14 years, firms are nervous.

“It’s a hold your breath Budget for small businesses,” Jo Foster, an entrepreneur from Richmond, told the Yorkshire Post.

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And she is worried about what Ms Reeves might announce next week.

The Chancellor is having to be all things to all people in this Budget.

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Ms Reeves has promised it will be pro-growth and pro-business, while at the same time pledging not to raise income tax, VAT or national insurance contributions.

She wants to put money into ailing public services, while having to fill an apparent multi-billion black hole in the Treasury’s finances.

Labour in particular has become stuck over its promise not to raise taxes on “working people”.

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Sir Keir Starmer said yesterday that he does not consider people who have an income from assets such as shares of property to be working people.

Richmond business owner Jo Foster. Credit: Guy Carpenter/Kiss The MoonRichmond business owner Jo Foster. Credit: Guy Carpenter/Kiss The Moon
Richmond business owner Jo Foster. Credit: Guy Carpenter/Kiss The Moon | Guy Carpenter/Kiss The Moon

“They wouldn’t come within my definition,” he said.

In a partial climbdown on Sir Keir’s position, Downing Street later clarified that people who hold a small amount of savings in stocks and shares still count as working people.

Last Sunday, Health Secretary Wes Streeting said people on his salary, of around £160,000, would not count as working people.

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Exchequer Secretary to the Treasury James Murray failed to clarify when he explained that “a working person is someone who goes out to work and who gets their income from work”.

This muddle has led people to suspect tax rises could be levied on businesses, with rumours about increases in capital gains tax and employer national insurance contributions.

And Ms Foster is worried. “You can’t squeeze small businesses any more, there is nothing to squeeze - everything is squeaking,” she said. 

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“They’re talking about national insurance on pension contributions, anything that is going to his small business. 

“That is going to hit small businesses. I just hope they realise small businesses have nothing left in the pot.”

Chancellor of the Exchequer Rachel Reeves is preparing to deliver her first budget.Chancellor of the Exchequer Rachel Reeves is preparing to deliver her first budget.
Chancellor of the Exchequer Rachel Reeves is preparing to deliver her first budget. | Getty Images

Ms Foster predicts there will be a raft of closures in the first quarter of 2025, when firms decide “it’s not worth it any more”.

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Kevin Hollinrake, the Shadow Business and Trade Secretary, told the Yorkshire Post he was “massively concerned” for the county’s independent traders.

Before becoming the MP for Thirsk and Malton, Mr Hollinrake co-founded the Hunters estate agency in York.

“We should be looking after small businesses and making their life easier,” he said.

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“If they change these taxes too much they will have a devastating impact.”

If Ms Reeves does bring in money from taxes on business, it is likely that they will go towards improving the NHS.

Shadow Business and Trade Secretary Kevin Hollinrake speaks to the Yorkshire Post. Credit: Edward Massey/ConservativesShadow Business and Trade Secretary Kevin Hollinrake speaks to the Yorkshire Post. Credit: Edward Massey/Conservatives
Shadow Business and Trade Secretary Kevin Hollinrake speaks to the Yorkshire Post. Credit: Edward Massey/Conservatives | Edward Massey/Conservatives
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The health service has been reported to be in line for a real-terms funding increase in the Budget, with Labour having promised to slash waiting lists.

Government sources have described reports that the NHS budget could rise by 4 per cent as inaccurate, but health policy experts have suggested such an increase is needed if Labour is to deliver on its promises.

Both NHS staff and providers have called for more investment, saying the Government’s plans cannot be delivered without additional funding.

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Health Secretary Wes Streeting has suggested that NHS trusts will need to deliver on reform in order to benefit from extra investment.

Tied into cutting waiting lists and improving the NHS is adult social care.

Mike Padgham, chair of North Yorkshire’s Independent Care Group, is concerned that raising employer national insurance contributions will damage the sector.

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Mike Padgham, left, with Social Care Minister, Stephen Kinnock, right.Mike Padgham, left, with Social Care Minister, Stephen Kinnock, right.
Mike Padgham, left, with Social Care Minister, Stephen Kinnock, right.

“It isn’t too late,” he said. “The Chancellor must pull away from measures that will harm the care of the most vulnerable and support the social care sector instead.

“The number of people living without the care they need has topped 2m for the first time but if the Chancellor doesn’t support us at the end of the month, things will get even worse.”

He explained: “The sector is already under-staffed and struggling to recruit, with 131,000 vacancies in the sector. 

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“Adding another cost to employers would bring further pressure and might put some providers out of business.”

Adult social care remains one of the biggest pressures on council budgets, with local authorities across the county calling for more help from central government.

Coun Carl Les, North Yorkshire Council leader, said that financial devolution would give local authorities greater stability and spending power.

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He said that letting local authorities set their own council tax rates and retain that money, as well as business rates and potentially some income tax, would be hugely helpful.

Coun Les said: “In North Yorkshire, we are facing a financial crisis and a significant underfunding situation.”

The Local Government Association recently revealed that one in four councils in England say they are likely to have to apply for an emergency bailout to stave off bankruptcy in the next two financial years.

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The LGA’s chair, Coun Louise Gittins, said: “The unprecedented emergency support given to councils this year reveals the extraordinary funding emergency facing local government. 

“As our survey shows, many more councils are being pushed into a precarious financial position.

“This is not just about numbers on a spreadsheet. Budget cuts needed to plug growing funding gaps will affect the most vulnerable members of society and the services our communities rely on every day.

“The Autumn Budget must provide councils with the financial stability they need to protect the services our communities rely on every day.”

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