(Bloomberg) -- Prime Minister Keir Starmer used a glitzy London investment summit to proclaim growth and wealth creation the cornerstones of his government, seeking to draw a line under a rocky first three months in power that saw his negative rhetoric about the state of the public finances weigh on economic sentiment.
The gathering of figures from business and Starmer’s new Labour administration drew pledges totaling some £63 billion ($82 billion) of private investment into Britain, more than double the amount raised at a similar event under the Conservatives last year, according to a government statement. However, as with previous such events, that headline figure appeared to be an effort to inflate the success of the summit, since most of the total consisted of previously announced pledges and projects.
The British premier also tried to calm jitters among businesses and investors ahead of the budget on Oct. 30, using a Bloomberg Television interview to reject suggestions that he could raise capital gains tax as high as 39%, a proposal entrepreneurs had warned would put off investment.
“A lot of speculation is getting pretty wide of the mark,” Starmer told Bloomberg’s Head of Economics and Government Stephanie Flanders, in response to a report in the Guardian that Chancellor of the Exchequer Rachel Reeves could hike the top rate of the levy by more than 10 percentage points from 28% currently. “That’s getting to an area which is wide of the mark,” he said when asked again.
The summit at the capital’s historic Guildhall, which dates from the 15th century and serves as the home of the City of London Corporation, attracted top executives from companies including Alphabet Inc., Brookfield Asset Management and BlackRock Inc.
With guests treated to an evening performance by British pop icon Elton John at St. Paul’s Cathedral, Starmer sought to project the pro-business stance that he adopted in opposition but has been accused of neglecting since winning power at the July election.
The premier needed a win after his first 100 days in office saw his poll ratings and business confidence falter amid concerns over looming tax rises and spending cuts. Several surveys in recent weeks have suggested the government’s gloomy language on its fiscal inheritance from the former Conservative administration had dented sentiment — turning Reeves’ budget into a make-or-break moment.
That was something Starmer set about trying to fix in his speech, as he promised to revive Britain’s economy through the “shock and awe” of private capital, pledging to “rip out the bureaucracy that blocks investment” and make the country’s regulatory regime “fit for the modern age.”
The premier told Bloomberg that decisions in the budget “will be determined by whether they help growth or not,” while Reeves recommitted in her speech at the event to capping corporation tax at 25%. Both said the Labour administration would offer stability and certainty for businesses after years of turmoil under the Tories.
Transcript: Keir Starmer Interviewed on Bloomberg Television
Still, they indicated that the budget at the end of the month would be painful. The chancellor is still expected to raise capital gains tax by some degree in order to help fill what she’s said is a £22 billion gap in day-to-day government spending this year. That’s in part because Labour’s election manifesto ruled out any increases to value added tax, income tax and national insurance, the Treasury’s three main revenue-raisers.
Capital gains on assets are currently taxed at between 10% and 28%, lower than the range on income tax. In the last tax year, capital gains tax raised some £14.5 billion for the Treasury, according to His Majesty’s Revenue and Customs, the UK tax authority. Some business figures at the event were unimpressed by the pledge not to hike capital gains tax to 39%, arguing that it needed to be set far lower.
Reeves also gave the strongest indication yet that she is considering increasing a business payroll tax. She denied doing so would be a breach of Labour’s election manifesto, telling reporters the document only ruled out raising national insurance for “working people,” not firms. Yet Paul Johnson of the Institute for Fiscal Studies think tank told Times Radio that such a move “would be a straightforward breach of a manifesto commitment,” suggesting a political row awaits.
In a sign of the challenge the Labour government faces in winning over businesses, former Google CEO Eric Schmidt told Starmer at a panel event that he was “shocked” his center-left Labour Party had said it was in favor of growth while in opposition. That said, there was “plenty of money” ready to come into the UK if Labour delivered on its rhetoric on wealth creation, Schmidt added.
Starmer argued in his Bloomberg interview that most business leaders who he’d spoken to at the event were more concerned by Britain’s planning and regulatory frameworks than the prospect of tax rises. “Contrary to perhaps what people might think, tax is not the first thing that businesses and investors are raising with me,” he said.
Those comments were buttressed by remarks from chief executives of some of the country’s largest lenders, who said international investors won’t be deterred by talk of raising taxes on private equity investors or scrapping a preferential tax regime for wealthy foreigners living in the UK.
“The kind of investors we’re talking about are the big international pension funds, the big international sovereign wealth funds, the private credit funds,” Lloyds Banking Group Plc’s Charlie Nunn told Bloomberg in an earlier interview. “They’re going to be looking for good projects with a good return with a government and a country that’s getting behind making those investments successful — that’s what will matter.”
In a separate interview with Bloomberg Television at the event, Barclays Plc’s C.S. Venkatakrishnan warned against hitting banks with tax rises at the budget. “Banks are among the highest taxed entities in the UK, we’re an important part of the economy,” Venkatakrishnan said.
Starmer pointed to the presence of scores of international executives who descended on London as proof his government is in tune with investors. “I think quite a lot of the inward investment decisions we’ve seen running into tens of billions are a vindication, if you like, of the approach that we’re taking,” he said.
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