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Barclays’ chief executive CS Venkatakrishnan has defended Rachel Reeves’ tax-raising Budget, arguing the UK chancellor had done an “admirable job” of balancing spending, borrowing and taxation despite a backlash from company bosses about the increased cost of doing business.
Reeves drew heavy criticism from company bosses for increasing their national insurance bills in her maiden Budget on Wednesday, with retail and hospitality executives warning the move would lead to job losses and higher prices.
But Venkatakrishnan backed Reeves on Thursday, arguing it was impossible to please all sectors.
“We all have to share the burden and quite naturally in certain sections there’s the feeling that another section should’ve borne more of it. Getting that balance perfect is impossible,” he told the Financial Times.
“I think they’ve done an admirable job of balancing spending, borrowing and taxation in order to drive the fundamental objective of growth,” added Venkatakrishnan, who was a member of the task force appointed by Reeves before the election to advise on the creation of a national wealth fund. “We can all quibble about little issues, there’s no perfect answer to this.”
Reeves spared banks from any increase in the surcharge on their profits or the levy on their balance sheets.
But other UK company bosses questioned whether she had produced a credible plan to boost the economy.
“We all knew we would have to go through some pain but the real question is where is the plan for long-term growth?” said Sir Martin Sorrell, executive chair of advertising agency S4Capital.
The Office for Budget Responsibility on Wednesday upgraded its growth forecasts to 1.1 per cent in 2024 and 2 per cent in 2025 but revised its predictions downwards for the following three years.
Sorrell said a rise in employers’ national insurance contributions was “not good news”. “It will make companies more jaundiced about taking employees on,” he said.
Industry group UKHospitality said Reeves’ Budget would increase the annual cost of employing a full-time staff member by an “eye-watering” £2,500. Employers are also facing costs of up to £5bn a year from Labour’s workers’ rights overhaul.
“It really feels as if we are being penalised for employing people,” said Simon Emeny, chief executive of pub and hotel group Fuller’s. He said hospitality had been hit by tax increases “disproportionately” compared to other industries.
James Baer, chief executive of Amber Taverns, said the increased labour cost for its pubs would likely mean price rises for customers. “Increasing costs on businesses ultimately does affect . . . the consumer, because it gets passed on,” he said.
Reeves said her cut in duty on draught beers would mean “a penny off the pint in the pub”. But Baer said this was “dishonest”, and prices “will have to go up to cover the increased wage costs”.
David McDowall, chief executive of Stonegate, the UK’s largest pub company, said the Budget was “a bitter pill to swallow”, because the increased costs come at the time when many businesses “are only just about coming up for air from the aftermath of a pandemic, energy crisis, rampant inflation, and cost of living pressures”.
The rise in NI was forecast to raise £26bn a year before factoring in changes in employers’ behaviour. The OBR, the fiscal watchdog, forecast the increase in revenue would eventually be £16.1bn in 2029-30.
The OBR figures assume employers will initially pass on 60 per cent of the additional tax costs though lower wages and higher prices, with 40 per cent absorbed in lower profits. In the long run, it expects three-quarters of the cost to be passed on, mostly through lower wages.
Andrew Murphy, chief executive of toy retailer The Entertainer, which has 165 shops, acknowledged the government faced difficult decisions but said increasing employment taxes “is self-defeating”, making it harder to create jobs in town centres.
Additional reporting by Laura Onita
