Rachel Reeves has announced that she has “unfinished business” as chancellor, choosing to cut costs as the goal she is most determined to achieve, in words that will be read closely by business leaders looking for change at the top of government.
Speaking at the annual conference of the British Chambers of Commerce in London on Thursday, Reeves pointed to the devolution of tax-raising powers to local leaders as an area of ”unfinished business” he wants to end. The intervention comes at a critical time, with Andy Burnham set to move into Downing Street next month following Sir Keir Starmer’s resignation on Monday, and City still speculating over who will take the keys to Number 11.
For SME owners who make up the majority of the chambers membership, politics is more important than policy branding. A chancellor who talks openly about revenue, and a prime minister-in-waiting who has made a name for himself, points to a meaningful shift in where decisions will be made about local growth, and property tax.
Tourist tax and tourist tax
The former mayor of Greater Manchester is moving quickly to put together a government plan that is widely expected to take more power and revenue from Westminster. Reeves has made it clear that he is going the same way.
“The place where there is unfinished business is in the distribution of funds,” he said. “And I put in last year’s Budget to consult, for example, on the tourist tax, which the joint Mayoral authorities will be responsible for, which moves us more in line with the US and Europe with a single tourist tax on hotel bookings, for example, and then that money is invested in your area.”
The overnight visitor tax has become one of the most hotly debated ideas in the devolution debate, with city mayors clamoring for power and parts of the tourism industry warning of an impact on bookings. The tension was on full display earlier this year when the mayor’s call for a hotel ‘visitor tax’ drew a lukewarm response from the tourist trade.
Reeves revealed that his ambitions extend beyond hotel rooms. “But in addition, we are consulting on spending some money on important taxes, including income tax, but we are also looking at business and land taxes and taking them to the local level so that local leaders who know their areas better can decide where that money will be spent.”
The councillor, who is the first woman to manage this office, said that she intends to reveal information about this year’s Budget. The travel direction echoes the government’s English Devolution White Paper, which created a pathway for mayors to propose new powers while leaving the Treasury to be more cautious about taxation.
Reeves pauses in the chancellor
Throughout the merger talks, Reeves refused to say outright that he wanted to keep his job under Burnham’s presidency. “When he becomes prime minister, he will make those decisions from the top team around him. But I will not solve those. These are his decisions,” he said.
He was warm in personal and political relations. “I supported Andy in 2015 to become our party leader, and I’ve known him for more than a decade and a half, since before I became a member of parliament in 2010. So we’ve worked together, but especially we’ve worked closely together in the last two years.”
That history coincides with a wide-ranging restructuring of the relationship between the center and the regions that have been building for a long time, the Ministry of Finance and the federal authorities coming together. Business has already seen that direction in measures such as Reeves’ plan to bring the National Economic Fund and regional mayors closer to local growth.
Financial regulations and the message of stability
Mindful of a predictable awards-giving audience, Reeves used the platform to reassure business that the incoming prime minister would not loosen public finances. Burnham, he said, was “really clear” on his commitment to fiscal rules.
“That’s a good thing because it means that businesses here can be sure that that stability, that strengthening of policy making, the firm grip on public funds, which is important to reduce inflation and interest rates, will continue,” he said.
The message is aimed squarely at a market still grappling with rapid change at the top, as business leaders called for an end to ‘drift and delay’ following Starmer’s exit.
North Sea reserves and energy security
Reeves also expressed his support for greater use of North Sea reserves. “I’ve been clear that I think the North Sea is an important asset for the UK and that oil and gas will be an important part of our energy mix for years to come,” he said. “And I’m very committed to making sure we use that resource to ensure our energy security.”
The chancellor spoke ahead of a speech by Andy Haldane, president of the BCC and former chief economist at the Bank of England, whom Burnham spoke to when putting together his policy platform. Officials from other major parties were also supposed to be on the stage, stressing that this conference has become a platform for political competition that will be closely watched by businessmen.
