(Bloomberg) -- Prime Minister Keir Starmer said there’s “no reason” for entrepreneurs to leave the UK, even as Chancellor of the Exchequer Rachel Reeves studies proposals to raise taxes on the wealthy, property, inheritance and pensions in her budget next week.
As part of the plans she’ll unveil on Oct. 30, Reeves is seeking to raise some £40 billion ($52 billion) to help fund Labour priorities and plug a fiscal void that she blames on her Conservative predecessor. That’s sparked concerns about hikes to a range of taxes and an exodus from Britain of wealthy people. Bloomberg revealed last week that one measure under consideration is to cut a capital gains tax break for those selling their businesses, known as business asset disposal relief.
Asked if entrepreneurs would leave the country as a result of Labour’s policies, the premier told reporters traveling with him to a summit in Samoa that “there is no reason for them to.” He pointed to £63 billion of private investment that the UK announced at its investment summit earlier this month as “evidence that what we are saying is attractive to investors.”
Starmer and Reeves have spent months laying the ground for what they describe as a set of “tough” decisions on tax and spending in Labour’s first budget in 14 years. The chancellor says the Tories left her a £22 billion hole in this year’s budget that she needs to fill in order to fix the foundations of the economy.
That will be the “first opportunity to define the way in which we will approach the economy,” Starmer told reporters on his way to the summit of Commonwealth nations. “We are going to tackle the inheritance in this budget, I’m not prepared to walk past it,” he said, adding: “that is a signal of the way I want to do business which is not to pretend our problems aren’t there, it’s to actually roll up our sleeves and deal with it.”
In an effort to generate more cash for public investment, Reeves has been debating changing the measure of debt used to inform the country’s fiscal rules. The Guardian said late Wednesday that she will announce the plan on Thursday at the annual meeting of the International Monetary Fund in Washington, a move the paper said would free up as much as an extra £50 billion of government spending on infrastructure.
While she won’t tell the IMF which measure she will now target, she has opted for public sector net financial liabilities, the Guardian said, citing a senior official that it didn’t name. PSNFL counts both the assets and the liabilities created by the government’s policy banks, which effectively removes them from the books.
Even before Reeves details the changes, the IMF appeared to issue a tacit endorsement of the plan.
“Given challenges associated with the energy transition, new technologies, technological innovation and much else, public investment is badly needed,” the IMF’s fiscal policy chief, Vitor Gaspar, said on Wednesday. He described as “very welcome” the fact that the UK is debating changing its rules to facilitate that extra investment.
Other policies under consideration by Reeves include wider reforms to capital gains tax, an increase in employer payroll taxes and changes to inheritance tax. Spending restraint urged by the Treasury sparked tense budget talks with government departments, and led some some ministers to go over the chancellor’s head and write directly to Starmer to protest. Despite that, Reeves told BBC radio that she’s reached agreement with all of her cabinet colleagues about their spending allocations.
Referring to a Treasury tradition whereby balloons representing each government department are inflated and stuck to the wall of the office of her deputy, Darren Jones, ahead of budget talks, before being popped when settlements were reached, she told the BBC: “All you need to know is there are no balloons left in the chief secretary’s office.”
Reeves said she was sympathetic to “the mess” her colleagues inherited from the Tories in their departments, but that any extra funding “has to be paid for either by taking money from other departments or raising taxes.”
Starmer said he expects more investment to roll in to Britain after last week’s successful investment summit, even though much of the spending totted up there had already been announced.
“I am confident that we will see more inward investment before Christmas to add to that,” he said. “Obviously there are other budgets to come but this is a significant one which will set the approach the framework and it will give a sense of how we intend to do business.”
Starmer is also looking to use the budget as a chance to reset his administration, following a turbulent first 100 days marked by internal rows which ultimately led to the early departure of his chief of staff, Sue Gray. The premier told reporters he’s pleased he’s got a “good team in place,” following her resignation.
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