UK (Parliament Politics Magazine) – Economists warn Chancellor Rachel Reeves against tax hikes, saying falling GDP and rising costs could slow down the British economy.
As reported by GB News, Rachel Reeves is facing pressure to scrap planned tax increases after new figures showed a slight drop in GDP growth for May 2025.
GDP declined by 0.2% in May, following a 0.3% drop in April 2025, posing another challenge for the Treasury, which relies heavily on economic growth.
Julian Jessop’s views on the UK economy
Julian Jessop, an economics expert at the IEA, warned that the Autumn Budget could deliver a shock severe enough to destabilise the economy again, citing recent growth setbacks.
He said,
“A large part of the slowdown is simply the reversal of the temporary factors that flattered growth earlier in the year, notably activity brought forward to beat Trump’s tariffs and the changes to UK stamp duty.”
Mr Jessop urged the government to prioritise supporting growth and warned against raising taxes to avoid further strain.
He stated,
“April also saw the new shocks from the increases in employment costs and higher energy bills, which are continuing to weigh on activity. But the more timely business surveys suggest that confidence is at least stabilising and may be recovering a little.”
Mr Jessop said,
“The upshot is that underlying growth is probably around 0.2 to 0.3 per cent a quarter and an outright recession should be avoided. But this would still be well short of the numbers required to fix the public finances.”
What is Rachel Reeves planning for business taxes?
Rachel Reeves plans to prepare a £1.7 billion reform of business rates, targeting higher taxes for major retailers, hotels, restaurants, and popular attractions across the UK.
The proposed changes would scrap the 40% business rates relief that currently benefits companies by £1.7 billion each year.
The new scheme offers lower multiplier rates for properties below the £500,000 threshold. The cost would be covered by charging a surcharge on properties worth more than £500,000.
The reforms would affect a range of businesses, including hotels, restaurants, theatres, tourist attractions, zoos, cinemas, caravan parks, and more nationwide.
What risks did Webber highlight regarding the business rates reforms?
According to John Webber, Colliers’ business rates chief, ministers were “disingenuous” to claim the reforms would support high street growth.
He added,
“It beggars belief how the Government’s plans will help if they lead to reduced investment and expansion or even employment opportunities in these bigger high street stores.”
What did Kate Nicholls say about ministers’ tax plans?
Kate Nicholls, leading Hospitality UK, called on ministers to deliver the full 20p discount, warning failure could lead to “carnage” on the high street and in retail.
She added,
“If they’re looking for more money, you cannot come back to the high street and have another bite at the cherry. If they do, they’ll tax us out of existence.”
What did industry sources warn about the Chancellor’s tax plans?
Industry sources fear the Chancellor may introduce a stealth tax through the reforms. The concern is that the surcharge will reach 10p, but the full 20p discount may not be delivered.
One insider said,
“It’s a genuine risk because they’re really fiscally constrained.”
Which retail giants have united against the Chancellor’s plans?
- M&S
- Asda
- Morrisons
- Primark
- Sainsbury’s
- Tesco
- Kingfisher (owner of B&Q)
The Labour-affiliated union Usdaw has joined the retailers, warning that the proposed reforms threaten many jobs.
Last month, they sent a joint letter to Ms Reeves, warning that the reforms could “negatively impact the jobs market” and cause a “cycle of economic downturn.”
What did Mel Stride say about Labour’s economic policies?
Mel Stride, shadow chancellor, warned that Labour’s policy reversals have created a “ticking tax timebomb” for the economy.
He added,
“Thanks to Labour’s reckless choices the economy actually shrank in May. This will pile even further pressure for tax rises in the autumn.”
What did Ben Jones say about tax plans and business growth?
Ben Jones, an economist at the Confederation of British Industry, said,
“With growing fiscal challenges and the autumn budget on the horizon, the chancellor must provide clear reassurance – no new taxes on business and instead offer a commitment to work alongside firms to dismantle barriers to growth.”
What did Suren Thiru say about the UK output decline?
Suren Thiru, the economics director at the Institute of Chartered Accountants in England and Wales, said,
“These downbeat figures undoubtedly increase anxiety over the health of the UK economy, with tumbling construction and manufacturing activity causing a disheartening decline in overall output.”
What did Sanjay Raja say about GDP and interest rates?
Sanjay Raja, the chief UK economist at Deutsche Bank, said,
“For now, weakness in GDP will cement some on the MPC’s fears that demand is loosening faster than expected. An August rate cut looks almost certain. And we expect more to come.”
How is GDP calculated?
- GDP measures all goods and services made in a country.
- It’s calculated by adding spending, income, or production.
- Main parts: consumption, investment, government spending, net exports.