Starmer defends his Chancellor and the Budget. But business owners say the country has been “mislead”, “stung” and “heads must roll”
Despite Chancellor Reeves facing calls for her resignation, Prime Minister Starmer stands by her, the Budget and fiscal gap claims
Budget background and backlash
Business owners and MPs, such as Shadow chancellor of the Duchy of Lancaster Alex Burghart, have voiced their concerns over Chancellor Rachel Reeves following revelations she overstated the fiscal crisis, with critics claiming the £26bn tax “raid” was designed to fund welfare spending rather than fix public finances.
Chancellor Rachel Reeves is facing mounting pressure from business owners to resign after the Office for Budget Responsibility revealed she had £4.2bn in fiscal headroom before announcing £26bn of tax rises.
Burghart said in a Sky News interview the Tories have written to the Financial Conduct Authority calling for an investigation into Reeves. Shadow Chancellor Mel Stride is reportedly calling for an FCA investigation into what have been described as “misleading” pre-Budget statements.
He said if anything “untoward” is found, it “will go right to the top”.
Based on any FCA findings that could prove any misleading actions taken by the Chancellor or the Prime Minister Burghart suggested in the Sky News interview,
The chancellor will certainly have to go, and it will depend on what the prime minister knew, at what time.
The fiscal watchdog confirmed that on 17 September the true fiscal shortfall was only £2.5bn, far less than the £30bn claimed by the Chancellor.
Ms Reeves and her team allegedly overstated the fiscal gap as they devised a £30bn tax buffer, aiming to protect themselves and Sir Keir Starmer from backbench pressure on welfare spending.
Reeves’ justification for increased welfare spending was to lift 450,000 children out of poverty, as she expressed in her Autumn 2025 Budget speech:
On the day I became Chancellor, I said that I would judge my time in office a success if I knew that ordinary children from working-class backgrounds who are living more fulfilling lives; Their horizons expanded, and their potential realised.
[redacted political content] I came into politics, because I believe every child has equal worth and deserves an equal chance to achieve their promise.
The biggest barrier to equal opportunity is child poverty.
Because for every child that grows up in poverty, our society pays a triple cost.
The first and the heaviest is to the child:
Going to school hungry…
Waking up in a cold home, or in another B&B…
While other children enjoy the advantages of parents with time to help with homework, the quiet space at home to work in – too many go without.
And there is also the cost of supporting a family in poverty which ends up in the lap of overstretched councils…
… who can do no more than shunt them into temporary accommodation, at huge cost to local taxpayers.
The political fallout
Conservative leader Kemi Badenoch has led calls for the Chancellor’s resignation. “We now know the truth,” she said, accusing Ms Reeves of lying “to justify record tax hikes to pay for more welfare.”
Reform UK deputy leader Richard Tice said the Chancellor “deliberately alarmed businesses, consumers, and markets” ahead of the Budget.
Paul Johnson, former chair of the Institute for Fiscal Studies, said the November 4 press conference “probably was misleading.”
Ms Reeves has defended her actions in a Sky News televised interview. When asked directly if she lied and misled voters, she responded: “Of course, I didn’t.” She also confirmed in the same interview that Prime Minister Starmer was aware of her tax strategy and approved of it.
According to YouGov November pre-Budget polls Starmer and Reeves’ popularity was already on a slippery slope.
While the government may have protected themselves by dropping their income tax plans, the public reaction to the Budget has still been negative, YouGov reported.
Key takeaways
- Only 11% think Rachel Reeves doing a good job as chancellor, with just 15% saying the government is handling the economy well
- A mere 3% say economy is in a good state, with 67% saying it will get worse over next 12 months
- Britons see Budget as unfair rather than fair (48% vs 21%) and unaffordable rather than affordable (22%)
- This fairness ratio is the second worst YouGov has recorded since 2010, second only to the 2022 mini-Budget
- Just 3% think changes leave themselves and their families better off; 9% say the same for the wider country
- Increasing gambling taxes and freezing train fares most popular budget measures (82%); reducing cash ISA limits least popular (16%)
PM defends his Chancellor and the Budget
Prime Minister Sir Keir Starmer has defended his Chancellor. He said because of the productivity review, the government had £16bn less than it otherwise would have done. That review had not been done for 15 years, he said.
Prime Miniser Keir Starmer defended the Budget,
There was no misleading, and I simply don’t accept. And I was receiving the numbers…Starting that exercise with £16bn less than we might otherwise have had – of course, there were other figures in this, but there’s no pretending that that’s a good starting point …
To suggest that a government that is saying that’s not a good starting point is misleading is wrong in my view.
However, the Office for Budget Responsibility, was expected to “revise down its estimate for productivity growth”, as this would impact “the numbers, spreadsheets and therefore the calculations and trade-offs she [Rachel Reeves] would have to make. In isolation, that made things harder for her, without question,” according to BBC Political Editor Chris Mason.
A the time of the 4 November pre-speech press conference, the Chancellor would have been informed and aware that “tax receipts were much better than expected and more than offset the reduction in productivity growth.”
As previously reported by The Freelance Informer prior to The Budget announcement:
“However, with boosted tax revenues coming in from higher Employer National Insurance contributions and higher wages, this black hole has become smaller, closer to £20 billion, rather than the £30 billion to £35 billion the chancellor and Treasury had estimated earlier in November, Robert Peston reported.”
Small business owners feel “betrayed and hammered”
The Budget’s tax measures have left many small business owners concerned about rising costs and profitability.
Kundan Bhaduri, Entrepreneur at London-based The Kushman Group, said the public had been deceived and called for the Chancellor to resign: “Can anyone dispute that this was deliberate deception? Labour knew the public finances were healthier than advertised, yet hammered businesses regardless,” he stated in a Newspage report.
Ranald Mitchell, Director at Norwich-based Charwin Mortgages, described the whole situation as “shocking” and demanded resignations:
The graft and risk-taking of Britain’s business owners is being steamrolled by a Government obsessed with swelling welfare while punishing those who actually drive the economy. If they knew the surplus existed, serious questions need asking of the Chancellor and Number 10. These people have monumental questions to answer.
Mitchell continued, according to Newspage,
This is a crisis of honesty, not economics. This isn’t just misjudgment. It’s a betrayal so brazen it’s hard not to feel the country’s been strung up by its own Government, and heads must roll. Both the Prime Minister’s and Chancellor’s positions and credibility as government leaders have been irreversibly damaged and they should resign.
Colette Mason, Author & AI Consultant at Clever Clogs AI, expressed her feelings of betrayal: “This isn’t economics; it’s political fraud… If you knowingly mislead the public about the nation’s finances, you are not fit to govern.”
Rohit Parmar-Mistry, Founder at Burton-on-Trent-based AI specialists Pattrn Data, agreed: “If the books were in the black while the public was told to brace for the red, it isn’t just an accounting error, it’s a betrayal of growth for the sake of failed ideology.”
Labour costs mounting
Reeves’ previous budget already increased the national living wage and employer national insurance contributions, raising the cost of labour.
The national living wage will rise by 4.1% to £12.71 an hour for those aged 21 and over. The national minimum wage rate for 18 to 20-year-olds will increase by 8.5% to £10.85 an hour.
Dean Rogers, managing director of Liverpool construction firm Frank Rogers, welcomed training support but noted concerns in a Newspage report. “Many construction businesses are still feeling the impact of last year’s Budget and the financial pressure it created,” he said.
Energy bills and operating costs
In the same Newspage report, Laura Court-Jones, Small Business Editor at Bionic, highlighted a key disparity. “A reduction in green levies is expected to knock about £150 a year off the ‘average’ domestic energy bill. But no similar relief has been announced for non-domestic energy users,” she said.
“While domestic energy has a price cap to keep rates relatively low, there’s no such cap for business energy rates, leaving businesses sensitive to price volatility if not locked into a fixed contract.”
Investment and dividends
Tax paid on dividends to shareholders will rise by two percentage points. This move has raised concerns about entrepreneurial investment.
Traditionally, dividends are taxed more lightly than wages to incentivise risk-taking among entrepreneurs. Business leaders fear that narrowing this gap could deter investment.
Pension contributions capped
A £2,000 annual cap will be introduced on the amount workers can put into their pensions under “salary sacrifice” schemes without paying national insurance.
The move is set to raise “a whopping £4.7bn”, according to Sky News’ Sophy Ridge, “which shows how many people will be impacted by this.”
By comparison, “mansion tax” on properties over £2m will raise £0.4bn, shared Ridge in an X Post.
Swap, gilts and mortgage rates
Justin Moy, Managing Director at Chelmsford-based EHF Mortgages, said the Government’s lack of transparency could have cost everyday homeowners millions.
He explained, “The Government failed to understand the impact its actions would have had on the Swap and Gilt markets, potentially costing mortgage holders millions in additional interest cost, whilst slowing our economy to a virtual standstill as businesses and the public waited for the worst news on the Budget.
“The Chancellor has hoodwinked everyone, the OBR has spilt the beans and the government are toast.”
Support for startups under pressure
The tax relief available on venture capital trusts has been slashed from 30% to 20%.
Chris Lewis, Chair, Venture Capital Trust Association said,
We are surprised and disappointed by the government’s decision to reduce upfront income tax relief for the VCT scheme, a change that risks undermining investor confidence at a critical time for UK scale-ups.
Lewis said, “While we welcome the increased VCT investment limits, as a reflection of the evolving capital requirements of high-growth businesses, and in recognition of the vital role that VCTs play in driving home-grown innovation and job creation, this progress risks being overshadowed by the reduction in upfront incentives.
What help is still available?
Despite the tax rises, the Budget included some measures to support small businesses.
Training support
The Government announced an £820m Youth Guarantee to give every young person a place in college, an apprenticeship or personalised job support.
Reeves will extend co-investment relief to those aged 22 to 24 when hiring apprentices. Previously, this applied only to apprentices under 22.
Innovation funding
A toal of £7bn will be allocated to innovative companies to scale and remain in the UK.
UK Research and Innovation will receive £38.6bn, including £9bn for government priority sectors such as AI, quantum computing and engineering biology.
Business rates relief
The Government has pushed through changes favouring retail, hospitality and leisure businesses. These sectors have a high physical footprint and were hit hardest during the pandemic.
Market reaction and economic outlook
Overall, a budget which results in the highest tax burden since the second world war appears to be at odds with the outlined commitment to economic growth.
-Alastair Power, Investment Research Manager, at Redmayne Bentley
Alastair Power, Investment Research Manager, at Redmayne Bentley, said the initial market reaction to the budget was “muted”, with many of the announcements already reflected in asset prices.
He said increased fiscal headroom and a lack of inflationary policies were “positively received” by the bond market, with gilt yields declining post announcement given support for expectations of further Bank of England interest rate reductions.
“Overall, a budget which results in the highest tax burden since the second world war appears to be at odds with the outlined commitment to economic growth,” Power added.
With business confidence shaken and political pressure mounting, impacted business owners face a difficult period ahead.
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