Chancellor’s ambitions depend on what businesses are inspired to do

“To govern is to choose” as the saying goes, and today our chancellor will tell us the choices she has made. Nobody should doubt how difficult those judgments are.
Over the past few months the CBI has submitted papers and had numerous meetings with Treasury officials, and with the chancellor herself, to make sure the voice of business is heard, but now she will have made her decisions, the die has been cast, so we must prepare ourselves for our job — to judge those decisions and to adapt our businesses and household affairs to the new circumstances.
It’s worth reminding ourselves why this budget is so important. Being the first budget of a new government that in its mind’s eye will believe it has a five-year, and possibly ten-year, horizon, it will tell us what their real priorities are outwith the need to win an impending election.
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It is also important because it could signpost a turning point for our economy, which since the global financial crisis in 2008 has seen real GDP per capita grow by a compound 0.4 per cent per year — in other words, barely at all.
At the same time, government interest costs have increased from £27 billion in 2020 to £108 billion in 2023. Demands on our public services have ballooned, driven either by demographics (the NHS, pensions) or by tougher regulations (utilities, prisons) or increased threats (defence).
We know the broad budget judgment: directly or indirectly almost every business and taxpayer is going to pay more tax. Business leaders will tend to be pragmatic; they understand that there is no magic money tree, let alone the orchard needed to satisfy all current demands, but the government should not confuse pragmatism with outcomes.
Yet the success of the government’s ambition to make the country the fastest-growing economy in the G7 lies in businesses’ hands, not the chancellor’s or the prime minister’s. Frustrating though it may be for policy-makers, it is the policy-takers who will determine the outcomes. It will be the decisions taken in the boardrooms of hundreds of thousands of companies up and down the land whether to invest in R&D and productivity, whether to hire more people, whether to be brave and ambitious or cautious and nervous, that will determine whether our economy starts to grow again.
These decisions will not be based solely on this week’s budget but on how that budget fits into government policy on employment, planning, regulation and training. No policy is an island unto itself. If employing more people is not only more expensive (NIC increases) but also more difficult and risky (employment rights bill), businesses will be reluctant to hire more people, particularly those who have been out of work for a long time. If the apprenticeship levy remains broken, they won’t invest in training. If rates remain unreformed, they will flee the high street. The chancellor can announce an investment-friendly budget but it will come to nought if planning and regulation make investment risky and uncertain. That’s what the CBI means by saying that businesses will judge things in the round.
The hundreds of thousands of people who run and invest in businesses in the UK are ambitious and want to create jobs and prosperity for themselves and for others. They yearn to sign off on board minutes that say: “The board unanimously agreed to Project Go For It.”
To do that, they need confidence; and to have confidence, they need to see that government policies — budget, laws, regulation — are consistent with each other, that the deeds match the words and that those who sit round the cabinet table understand the truth of Winston Churchill’s comment: “Some regard private enterprise as if it were a predatory tiger to be shot. Others look upon it as a cow that they can milk. Only a handful see it for what it really is — the strong horse that pulls the whole cart.”
Rupert Soames is chairman of the CBI