Profit drives growth – it’s not a dirty word

Rachel Reeves
Rachel Reeves

There appeared to be a degree of accord between the leader of Britain’s hard-pressed business community and the Chancellor of the Exchequer at the CBI conference this week. Companies are reeling from Labour’s £25 billion increase in Employers National Insurance but, when Rachel Reeves insisted that her critics had failed to suggest any alternatives to higher taxes, Rain Newton-Smith seemed to agree.

The CBI chief claimed that no one was questioning the need for “tax rises to really help fund our public services”, quietly adding that the specific levies set out in the Budget had taken business by surprise. The Chancellor and Ms Newton-Smith are inverting one of Margaret Thatcher’s most famous sayings: there is no alternative – to tax increases.

The 1980s prime minister stated that there was no alternative to her economic policies. But subsequent events proved that the Iron Lady was correct in her analysis. The low-tax, entrepreneurial economy her reforms engendered is precisely what Sir Keir Starmer’s Labour Government appears determined to dismantle.

There is no sign that the Chancellor is having second thoughts about her tax hikes and enterprise-dampening policies. Ms Reeves told the conference that she had asked businesses and the wealthiest to contribute more and knew her changes would have an impact, before adding: “I stand by those choices as the right choices for the country.”

While Ms Newton-Smith may say that tax rises like these must “never again” be inflicted on business, it is surely reasonable to expect an organisation such as hers to take a more forthright position as a champion of reduced taxation? According to a recent CBI survey, almost two thirds of companies have a negative view of the Budget, warning it has forced them to abandon plans to hire more staff. Close to half fear they will have to begin laying off workers.

Ms Newton-Smith did offer a staunch defence of profits, rightly insisting that they “aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.” She warned that when competitiveness is hit, so too is growth.

Conservative leader Kemi Badenoch has conceded that her party failed to understand the “needs and concerns” of business. Some Tory leaders have been as squeamish as the CBI about defending profit as the engine of economic growth. Let us hope that Ms Badenoch will not make the same mistake.