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On 30 October, Rachel Reeves will deliver the first Budget by a Labour Chancellor since 2010.
The challenge that faces her is huge.
It’s been a turbulent ride to get to this point. As time has passed since the Government took office, commentators have questioned the decision to wait nearly four months to deliver a Budget. It’s left a political vacuum, leaving the Government easily buffeted by events.
But as Budget day now approaches, what might we expect, what is the context in which it will be delivered, and, crucially, what should be your approach to influencing the aftermath?
While the Government has been very clear that a significant ‘blackhole’ exists in the public finances, it has not yet confirmed whether (or more realistically what) tax rises will fill it. This will be critical to how the Government will finance its manifesto promises and deliver its overarching pledge to drive economic growth.
With that uncertainty hovering above the public discourse, the pitch-rolling has therefore begun for measures to increase revenue, no doubt informed by a more political eye being brought by the Prime Minister’s new Chief of Staff, Morgan McSweeney. Changes to inheritance tax, employers’ national insurance, and capital gains tax, have all been mooted, with a focus on emphasising that these are not taxes on ‘working people’ – the language used by Labour’s manifesto.
We know from conversations that we have had with figures close to the Government that it is now focused on crafting a compelling ‘retail’ offer, to demonstrate that it is on the side of “working people”. There is a recognition that too much political capital was expended on policies such as changes to the Winter Fuel Payment.
These shifts in strategy could have significant impacts for businesses. The risk lies in exactly what “working people” means; for example, a rise in National Insurance contributions for employers might not hit people directly, but could damage business confidence, wages and hiring.
Right now, businesses should be paying close attention to their political intelligence and monitoring to underpin their planning. Organisations need to understand the key individuals who are driving decisions, their motivations and priorities, and what potential government approaches now tell us about the Government’s longer-term strategy.
While core tax policies inevitably dominate headlines before the Budget, there are of course a myriad of other policy areas around which businesses would like to see changes.
Companies and clients we have been speaking to have highlighted:
With increases to Capital Gains Tax and Employer NI almost certain, the Government could use policy around the areas above as a way to appease business and demonstrate its commitment to working in partnership.
Government departments are now locked in negotiations with the Treasury, as they try to carve out the best financial offering they can secure. Once the Budget has been announced, however, those same departments will be tasked with implementing the choices of the Chancellor – and preparing for the larger Spending Review in the Spring.
Many departments have spent the months since the election establishing their core approach to delivering manifesto pledges. Once they have a clear budgetary position from which to work, they’ll be ready to start the intensive engagement with industry that will support policymaking – and you need to be ready to contribute to that.
We’ve heard several times from both civil servants and political figures that there is a clear understanding that the Government must bring industry with it. It cannot either find or implement workable solutions to many challenges without buy in from commercial organisations.
Now is the time to be thinking about your engagement with relevant departments in November and beyond. How best to align with departmental and ministerial priorities? Which messages and tactics will resonate most? These decisions will be critical to securing the support you need from ministers and civil servants, once they know their departmental budgets
It’s easy to be caught up in the drama of these big fiscal events. We’ve now waited so long for a Budget to happen, it almost risks being anti-climactic. But it’s vitally important not to forget that the Budget is just the first step in the Government’s policymaking process.
There are three things you need to focus on now:
1. Prepare for the forthcoming Spending Review, due next Spring, which will set spending plans for a minimum of three years. Formal submissions are closed, but as with the Budget, you should be developing a concrete strategy for influencing its continued development and the outcomes which emerge.
2. Influence the development of the Industrial Strategy, which the Government is now consulting on. It’s the perfect time to consider your own response, especially if yours is one of the key growth sectors which include clean energy, digital and tech, and advanced manufacturing. The Strategy will set the foundation for how the Government drives economic growth, its central goal that underpins all other commitments. As such, through influencing the development of the Strategy, organisations have the opportunity to shape their commercial environment for years to come.
3. Expand your network, and build relations with key Departments and the wider ecosystem, to create advocates for your position. With a new Parliament, over 340 new MPs, dozens of new ministers and a civil service with renewed purpose and vigour, it’s critical that organisations are establishing and building relationships with those stakeholders developing and influencing policy.
The Budget represents a huge opportunity both for the Government and for business, re-setting the financial framework for the years ahead, and putting a new stamp on the UK economy. Your engagement must be long-term in outlook, and consider every milestone ahead, not just the short term.
Now is the time to be prepared for what comes ahead, or risk falling behind.
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