Starmer Stands by Chancellor as Budget Uproar Grows
Budget Controversy: Smoke, Mirrors, and a Growing Backlash
In a display of political fortitude—some would say stubbornness—Prime Minister Sir Keir Starmer has leapt to the defence of Chancellor Rachel Reeves, even as business owners and MPs call for resignations over the latest Budget. The charge? Reeves overstated the so-called fiscal black hole, leading to a £26bn tax raid that many now see as less economic necessity and more a political convenience.
Because, of course, overstating a crisis is the time-honoured way to ram through tax hikes. What could possibly go wrong?
The Numbers Don’t Add Up
The Office for Budget Responsibility (OBR) revealed that Reeves actually had £4.2bn of fiscal headroom before announcing those £26bn in tax rises. Yet, in the pre-Budget narrative, a £30bn shortfall was cited as justification for the pain to come. The actual shortfall, as confirmed by the fiscal watchdog, was a mere £2.5bn.
Let’s recap the numbers:
| Claimed Fiscal Shortfall | OBR-Confirmed Shortfall | Tax Rises Announced |
|---|---|---|
| £30bn | £2.5bn | £26bn |
This creative accounting hasn’t gone unnoticed.
Political Fallout: Calls for Heads to Roll
Shadow Chancellor Alex Burghart and Conservative leader Kemi Badenoch have demanded the Chancellor’s resignation, with suggestions that the Financial Conduct Authority investigate possible misleading conduct. Reform UK’s Richard Tice accused Reeves of deliberately alarming businesses and stoking market fears to suit her agenda.
Paul Johnson of the Institute for Fiscal Studies was blunt: the Chancellor’s November press conference “probably was misleading.” Not a ringing endorsement.
Reeves, for her part, has denied any deception. In a Sky News interview, she stated, “Of course, I didn’t [lie].” Starmer has echoed this defence: “There was no misleading, and I simply don’t accept [the criticism].”
Public Mood: From Sceptical to Outraged
YouGov’s November polling paints a bleak picture for the government:
Only 11% think Reeves is doing a good job.
Just 15% believe the government is handling the economy well.
A paltry 3% say the economy is in a good state.
67% expect things to get worse in the next year.
In short: confidence has left the building. The Budget is seen as unfair by 48% of Britons, with just 21% calling it fair. For perspective, this fairness rating is the second worst since 2010—exceeded only by the infamous 2022 mini-Budget debacle.
Contractor and SME Reaction: Betrayed, Hammered, and Furious
The Budget has landed like a sledgehammer on the self-employed, small business owners, and UK contractors. The chorus of anger is as loud as it is justified.
Kundan Bhaduri, entrepreneur: “Can anyone dispute that this was deliberate deception? Labour knew the public finances were healthier than advertised, yet hammered businesses regardless.”
Ranald Mitchell, mortgage director: “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.”
Colette Mason, author & AI consultant: “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, AI founder: “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.”
The Hidden Costs: Labour, Energy, and Investment
Labour Costs on the Rise
The national living wage increases by 4.1% to £12.71/hour for 21+.
Employer National Insurance contributions are up, compounding pressure on payroll.
Even the construction sector, which welcomes training support, remains wary. Dean Rogers, a managing director in Liverpool, notes: “Many construction businesses are still feeling the impact of last year’s Budget and the financial pressure it created.”
Energy: Domestic Relief, Business Neglect
While a reduction in green levies is expected to knock £150 off annual domestic energy bills, businesses get no such relief. With no price cap for commercial users, volatility and cost remain a constant threat.
Investment and Dividends: More Tax, Less Reward
Dividend tax is up by two percentage points, closing the gap with income tax.
Venture Capital Trust (VCT) tax relief is cut from 30% to 20%.
Chris Lewis, VCT Association Chair, warns that this “risks undermining investor confidence at a critical time for UK scale-ups.”
Pensions: Another Squeeze
A new £2,000 cap on salary sacrifice pension contributions without NI will raise £4.7bn—a staggering sum compared to the much-touted “mansion tax” which scrapes in just £0.4bn.
Mortgage Rates: Unintended Consequences
Justin Moy, mortgage broker, points out: “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.”
What’s Left in the Goodie Bag?
A few crumbs for the self-employed and small businesses:
Training Support
£820m Youth Guarantee for apprenticeships, college places, and job support.
Co-investment relief for apprenticeships extended to ages 22–24.
Innovation Funding
£7bn for innovative companies.
UK Research and Innovation to receive £38.6bn, with £9bn for cutting-edge sectors.
Business Rates Relief
Retail, hospitality, and leisure sectors receive targeted support, but little solace for others.
| Policy Area | Positive Measures | Scepticism Remains |
|---|---|---|
| Training | Youth Guarantee, extended relief | Will it reach contractors? |
| Innovation | £7bn for scale-ups | VCT relief cut, undermining confidence |
| Energy | Domestic bill cut | Businesses ignored |
| Business Rates | Sector-specific relief | Not broad enough |
Market Reaction: Muted, But Not Impressed
Alastair Power, investment research manager at Redmayne Bentley, summed it up:
“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.”
While gilts and bond markets appreciated the lack of inflationary giveaways, the broader message is clear: business confidence is shaken, and the Budget’s credibility is in tatters.
Quotes & Sources
The Path Forward: Skepticism as Standard
For UK contractors, the message is simple: don’t expect government to be your friend. If the Budget’s architects will bend the numbers for political cover, how much faith can you place in their promises of support or stability?
The next step? Contractors and business owners must scrutinise every Treasury announcement, pressure their MPs, and—when the time comes—vote with clear eyes and a long memory. Because when government treats the truth as a mere inconvenience, it falls to the people who actually drive the economy to insist on better.
Look out for further updates and analysis in the next Freelance Informer newsletter. Vigilance is not just recommended—it’s essential.
