Chancellor Rachel Reeves is reportedly considering another major tax rise, targeting thousands of Britain’s self-employed professionals, in a bid to fill what critics are calling a growing “black hole” in the public finances.
According to The Telegraph, the Treasury is exploring plans to raise an additional £2 billion in the Autumn Budget on November 26 by imposing a new charge on limited liability partnerships (LLPs).
The proposed measure would see partnerships, used by around 190,000 people including GPs, lawyers and accountants, brought into the scope of employers’ National Insurance Contributions (NICs). Currently, partners in LLPs are classified as self-employed and therefore not subject to the charge.
The idea has emerged from a report by the Centre for the Analysis of Taxation, which described the current exemption as an “accident of history” and called for the introduction of new “partnership NICs.” Treasury officials are said to be examining the measure as part of wider efforts to close a multi-billion-pound gap in the public finances.
Borrowing Pressures Mount
The move comes as Government borrowing has surged, with figures showing that Labour borrowed nearly £100 billion in the first half of the financial year, the highest level since the pandemic. The data has piled further pressure on Ms Reeves ahead of her Autumn Budget on November 26.
Inflation figures, due today (Wednesday), are also expected to add to the strain as the Chancellor seeks to stabilise public finances while funding Labour’s spending commitments.
Reeves Blames Brexit for Fiscal Black Hole
Speaking at the Regional Investment Summit in Birmingham, Ms Reeves suggested that decisions taken before Labour entered government were to blame for the current economic challenges.
“I don’t think that the past has to define our future. That’s why we are doing things differently. That’s why we are deregulating. It’s why we’re overturning the planning system,” she said.
“It’s why we are backing all regions of the UK with the capital spending that we’re putting in. Because I’m determined to defy those projections [from the Office for Budget Responsibility] and grow our economy quicker.
“We also know – and the OBR, I think, is going to be pretty frank about this – that things like austerity, the cuts to capital spending and Brexit, have had a bigger impact on our economy than even was projected back then.
“That’s why we are unashamedly rebuilding our relations with the European Union to reduce some of those costs that were, in my view, needlessly added to businesses since 2016 and since we formally left a few years ago.”
However, Brexiteers are quick to point out blaming Brexit is “ridiculous”. Former MEP Brian Monteith said: “You know the Labour Government is in trouble when it reaches out to Brexit as a scapegoat for the bad consequences of its own decisions.”
Writing in The Scotsman, Mr Monteith says: “Firstly, total British trade to the World is up and rather than the project fear nightmares of being unable to access EU goods being made real the EU is exporting more goods to us than before. On the financials, import revenues provided since leaving amount to £23.3bn, and according to facts4EU.org £88bn has been saved on membership fees. That is a black hole of £111bn that Jeremy Hunt and Rachel Reeves would have had to cover.”
“Reaching for my copy of “75 Brexit Benefits” by Gully Foyle I find many new EU costs we have avoided or would have to pay in future. These include the EU’s packaging taxes worth £2.9bn we avoided over the last three years and the emissions trading scheme revenues of £1.5bn estimated for payment in 2027. Without Brexit Labour would be in a worse financial mess than it has made for itself.”
Political Backlash
Whitehall sources have suggested that the Office for Budget Responsibility (OBR) will now downgrade the UK’s productivity growth by between 0.1 and 0.2 per cent, a revision that could add between £9 billion and £18 billion to the amount the Treasury needs to raise through taxes or spending cuts.
Ms Reeves’ attempt to link the productivity downgrade to Brexit has also sparked criticism from across the political spectrum.
Nigel Farage, the Reform UK leader, said: “It is lame excuses from a failing Chancellor. She insults Labour-voting Brexiteers.”
Mel Stride, the Conservative shadow chancellor, also condemned the Government’s fiscal approach, saying: “Borrowing is soaring under this Labour Government. Rachel Reeves has lost control of the public finances and the next generation are being saddled with Labour’s debts.
“If Rachel Reeves had a plan – or a backbone – she would stand up to her backbenchers, get spending under control and cut the deficit. Instead, she is plotting to hike taxes yet again to pay for her failures.”
Critics warn that further tax rises could drive even more professionals and entrepreneurs out of the country, worsening Britain’s already fragile economic climate. Economists have cautioned that excessive taxation risks undermining growth, a concern some say the Chancellor has yet to address.
The Autumn Budget is set to be delivered on November 26, when Ms Reeves will outline how she plans to balance Labour’s fiscal ambitions with mounting economic pressures.
