Chancellor pre-Budget speech: Legal comment

Chancellor Rachel Reeves has set out her vision for the future of the UK economy ahead of the Budget later this month.

In a speech yesterday (4 November), she laid out three government priorities – cutting NHS waiting lists, reducing the national debt and bringing down the cost of living.

The Chancellor said “we will all have to contribute to that effort” in remarks that have been reported as paving the way for tax rises.

Responding to the speech, Craig Elder, partner in the government team at Browne Jacobson, said: “In giving us a glimpse into her vision for the country post-budget, the Chancellor has rightly identified a lack of investment in public infrastructure as one key reason for sluggish economic growth. 

“The clear message was that a rise in income tax rates is favoured over a range of more ‘stealthy’ hikes that, while staying within the letter of the manifesto commitment (not to raise income tax, VAT or national insurance rates) and avoiding the greatest short-term political turbulence, might impose greater drag on economic growth. Broadening the base of the main revenue-generating taxes is also the clearest way to provide the financial headroom needed for infrastructure investment. 

“The extent to which new infrastructure such as hospitals, schools and transport systems will be funded in partnership with the private sector isn’t yet clear. However, the Chancellor’s reference to crowding in private investment suggests this will form an important part of the government's plans – in preference to a reduction in infrastructure investment or more borrowing.

 “The government has already suggested it will explore the use of public-private partnerships (PPPs) to back certain projects, including some community health centres and renewable energy schemes, but this remains a very narrow remit. 

“The Chancellor may consider using the Budget to set out a broader commitment to private investment into a wide range of new infrastructure, while learning the lessons from previous models such as PFI. For example, by ensuring greater flexibility, transparency and better value risk transfer.”