The Budget was given a resounding thumbs down by employers last night amid concerns over weak economic growth and a ‘fiscal fantasy’ at the heart of Labour’s plans.
In a damning assessment that will make bleak reading on Downing Street, a poll of 500 business leaders by the Institute of Directors (IoD) found 80 per cent ‘feel negative’ about the Budget.
That is even worse than the 67 per cent that disapproved of Rachel Reeves’ first effort in a similar snap poll last year.
With business facing a fresh round of tax hikes and rising costs, the IoD warned bosses ‘remain unconvinced by the Government’s growth strategy’.
And Anna Leach, chief economist at the group, said: ‘This Budget has landed badly with business leaders.’
The grim verdict came as gilt yields rose and the pound fell as investors cast doubt over the Chancellor’s plans to bring borrowing back under control with tax hikes ‘backloaded’ to the end of the decade.
No confidence: A poll of 500 business leaders by the Institute of Directors found 80% ‘feel negative’ about Chancellor Rachel Reeves’s Budget
Helen Miller, director of the Institute for Fiscal Studies, said this would require ‘near-heroic restraint in an election year’, adding: ‘Before the Budget, the UK was faced with lacklustre economic growth, stagnating living standards and a dizzying array of fiscal pressures. The same is still true after this Budget.’
The ten-year gilt yield – a key measure of government borrowing costs – rose to 4.48 per cent after briefly falling to 4.42 per cent following the Budget, while the pound slipped towards $1.32.
In its report, the Office for Budget Responsibility (OBR) noted that ‘UK government bond yields are now the highest in the G7 and second highest among the advanced economies after Iceland’.
After downgrading its economic growth forecasts, the OBR warned Reeves’s Budget would have ‘no significant impact on output by 2030’.
The Chancellor’s plans involve tax hikes of just £2.9billion in 2027-28 and £10.7billion in 2028-29, rising to £23.2billion in 2029-30 and £26.6billion in 2030-31.
Referring to St Augustine’s prayer to ‘make me chaste, but not yet’, Stephen Millard, deputy director for macroeconomics at the National Institute of Economic and Social Research, said: ‘This was a classic example of the Augustinian approach to public finance rectitude.
‘The bulk of the tax increases, the bulk of the fiscal contraction is happening right towards the end of the Parliament.
‘Given that will be just ahead of an election, it strikes me as very hard to believe that the Government can credibly commit to a fiscal tightening at that stage.’
Sanjay Raja, chief UK economist at Deutsche Bank, said: ‘Much of the consolidation efforts are backloaded – raising questions around both the credibility of such fiscal tightening and delivery ahead of the next general election.’
The IoD poll found opposition to a string of policies announced in the Budget, including the salary sacrifice tax raid on pensions, a cut to tax relief on investment and increases to the minimum wage.
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