Chancellor: ‘Nothing Off the Table’ on Business Support

Appearing at the influential Treasury Committee, the Chancellor, Rachel Reeves, was supposed to discuss her Spring Statement, although the war in the Middle East meant most of the two and a quarter hour session was spent discussing the conflict.

John Grady MP kicked off the questions, asking the chancellor: ‘What does the Iran war mean for inflation, interest rates and growth?’

Reeves told the gathered MPs: ‘It is too soon to be able to tell what the impact is. As a government and in my role as the chancellor we are working hard to deescalate.

‘At this stage it would be unwise to speculate on impact, but of course we are looking at a number of scenarios’, adding ‘it is certainly not good for the economy.’

Referring to the chancellor’s promise to give extra funding to the Ministry of Defence (MoD), Grady said: ‘We have high debt to GDP, do we have the fiscal room to give money?’

Reeves responded: ‘We are in a stronger position than when I became chancellor’.

But Grady wanted to press the funding issue, saying: ‘People have always promised tightening tomorrow… whenever crisis comes along, we spend money, and the tightening never occurs.’

Defending further MoD funding, the chancellor said: ‘If you look at the deficit this year it is going to come in at 4.2% of GDP, compared to 5.3% last year… we are in a stronger position’.

Luke Murphy MP wanted to know about the state of readiness in the Treasury if the economy turned down. He asked: ‘What preparation is underway in the Treasury for planning to support businesses if the war goes on?’

The chancellor replied ‘the Treasury is always planning for different eventualities’.

When pushed for a more detailed answer, Reeves said: ‘Nothing is off the table at this stage. We are looking at targeted support as well as broader measures. It is too early to say.’

As the committee had originally planned on focusing on the Spring Statement, some time was left over for discussions over unemployment and the tax gap.

John Glen MP challenged the chancellor over the cost of hiring, with high employer’s national insurance an ongoing concern. ‘One of the issues is the cost of employment… do you not feel that the labour market is something that needs an urgent intervention?’ he asked.

Reeves told the MPs: ‘I do recognise some of those challenges… we did make decisions to increase national insurance contributions because we needed to fund public services.

‘It’s a valid argument to say it should not have happened, but if that didn’t happen, we wouldn’t be able to put that money in the NHS’.

Glen pushed the chancellor on business confidence, asking: ‘Do you think your measures are the right ones?’

In a tetchy back and forth between the former City minister and the chancellor, the focus was on employers as much as anything else.

The chancellor said: ‘The OBR [Office for Budget Responsibility] has not negatively scored the Employment Rights Act.’

Glen interjected: ‘That’s hardly going to be a positive is it.’

The chancellor replied: ‘It gives people greater security.’

Glen asked what that meant ‘for an employer who is anxious’.

But Reeves was robust, stressing: ‘This argument played out when the last Labour government introduced a national minimum wage.’

Glen tried to push the point saying ‘that was 30 years ago, we have seen youth unemployment at record levels now’.

Reeves said: ‘With respect Mr Glen, we saw youth unemployment increase under the last government… I just don’t accept the premise of your question.’

To close the hearing, questioning turned to the tax gap, with Yuan Yang MP asking the chancellor if there was ‘more to be done on narrowing the tax gap’.

Reeves said: ‘Those with broadest shoulders should pay more tax… we have highly progressive tools, and we’ve done the things we want to do.

‘The other thing we have done that is successful is collecting more tax that is due, working with the excellent team at HMRC to crack down on tax avoidance.’

Business & Accountancy Daily

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