Reeves must provide ‘more stable’ tax policy, finance bosses say
Rachel Reeves is facing pressure to provide a “clearer, more stable tax environment,” when she delivers her growth strategy in July.
The Chancellor is once again in the spotlight after a damning report from finance bosses indicated the industry was prepped to support growth ambitions, but structural barriers were holding them back.
Top players in the financial services ecosystem – KPMG, UK Finance and PIMFA – said “potential will remain untapped unless underlying structural challenges are addressed”.
The report said reforms to tax policy posed a “valuable opportunity” to drive up “greater confidence”.
Business confidence sank in the fallout of Reeves’ maiden budget, where taxes were hiked £40bn.
The Chancellor’s controversial change to employer’s national insurance came into effect last month, with rates for firms upped 1.2 per cent to 15 per cent.
Liz Field, chief executive at PIMFA, told City AM: “Investors and firms need stability to make informed decisions and to invest for the future,
“Mixed signals on taxation only compound the problem.”
He added it was crucial to avoid “knee-jerk reactions” on tax policy.
The Chancellor is facing mounting speculation of another tax hike after it was calculated half of her £9.9bn in fiscal headroom had been wiped out just 48 hours after the Spring Statement.
Field said “Uncertainty surrounding non-dom tax status has driven more capital and talent overseas, which impacts UK investment and competitiveness.”
She added: “Frequent shifts and speculation around issues like tax-free cash, pensions, and ISAs undermine confidence and disrupt financial planning for clients.”
‘Vital opportunity’
Reeves’ inaugural Financial Services Growth and Competitiveness Strategy is pencilled in for July 15, where the industry will be anticipating the Chancellor’s plan to boost the economy.
Reeves hosted a series of summits with financial leaders, including lenders, fintechs and investment bankers, at the beginning of the year in her hunt for ideas to kickstart growth.
Daniel Barry, partner at KPMG UK, said: “As risks to the UK’s finance stability are rising, the government has a significant opportunity to instil greater confidence among sector leaders at a time of great uncertainty and geopolitical volatility.”
The report from KPMG, UK Finance and PIMFA compiles views from chief executives and senior leaders across the private bank and wealth management industry, as well as financial advice and related services.
The sector holds over £1.6tn in assets and bosses said reforms were needed to “unlock the full potential”.
Field said: “There’s a concern across our sector that without a more stable, proportionate and joined-up policy environment, we risk missing a vital opportunity to unlock investment, drive innovation, and promote greater financial resilience across society.”
Regulation was another key area bosses were eying for reforms to make it “more predictable, consistent, and supportive of the industry.”
The Treasury published its “radical action plan to cut red tape and kickstart growth” in March, promising a dramatic shakeup.
Reeves announced the abolition of the Payments System Regulator in March, as the government waged war on “unnecessary regulation.”
But finance chiefs have said there is still a long way to go.
The report called for closer collaboration between the Financial Conduct Authority, Financial Ombudsman Service and Financial Services Compensation Scheme.
Eric Lendeers, managing director of personal finance at UK Finance, said: “We need to remove barriers, modernise regulation and really invest in improving financial literacy.”