Difficult choices ahead for the chancellor

CHANCELLOR Rachel Reeves has warned the government is facing difficult choices as the clock counts down to her Autumn Budget.

In her keynote speech at Labour’s annual party conference in Liverpool she pledged to keep “taxes, inflation and interest rates as low as possible”.

However, there was also a hint that further tax rises may be ahead when she delivers her Budget in November.

The chancellor told the conference the government’s choices had been made “harder” by international events and the “long-term damage” done to the economy.

Economists believe she faces a choice of hiking taxes or cutting spending – if she is to meet her self-imposed fiscal rules. If she chooses the first option, the question remains where she will target the increases.

The rise in employers’ National Insurance Contributions (NICs) she announced in her 2024 autumn budged has had the biggest impact on small businesses.

The boss of Tesco has also warned the government against adding extra costs to UK retailers in the upcoming Budget, saying “enough is enough”.

Ken Murphy said he did not want to see a repeat of the last Budget, when “the industry incurred substantial additional operating costs”.

In her speech Ms Reeves told her audience that she would not take risks with public finances and stressed her commitment to “economic responsibility”.

The chancellor said: “We will face further tests, with choices to come made all the harder by harsh global headwinds and long-term damage to the economy, which is becoming ever clearer.”

In a wide-ranging speech Ms Reeves also vowed to abolish long-term youth unemployment and to invest in British industry. She also urged people to “have faith” in Labour’s agenda.

The chancellor confirmed that every eligible young person who has been on Universal Credit for 18 months without earning or learning will be offered guaranteed paid work through a new ‘Youth Guarantee’.

The new initiative aims to build upon existing employment support and sector-based work academies currently being delivered by the Department for Work and Pensions. The scheme forms part of the government’s aim to provide targeted support for young people at risk of long-term unemployment. 

Responding to the jobs guarantee announcement, policy chair of the Federation of Small Businesses (FSB), Tina McKenzie, said: “This is a hugely important announcement – offering thousands of young people a crucial chance in life.

“Reprioritising spending from employment programmes which aren’t working to this type of scheme is exactly the way to get much-needed bang for taxpayer cash.

“It is a welcome commitment that – done right – will help small businesses do what they do best, provide jobs in our local communities, and help those who need it most get into work.

“Key to getting the details right is making sure there is a backstop offer to those who are now over-25, particularly those with health challenges; that young people out of work for health reasons are not excluded through misguided double funding rules; and that small businesses are enabled to play a full role in the delivery of the scheme.

“We look forward to working with the Treasury to get the important details of this announcement right, and we hope it heralds a pro-jobs, pro-self-employment, pro-business, pro-growth Budget in two months’ time.”