5d1e74b418d2fdd4f1e542c1c99b890e9c4b065c

The boss of the UK’s most influential business group will use a landmark speech to warn that the heavy business tax burden is nudging British firms towards a “tipping point”, directly linking the Labour government’s troubles to cost pressures on firms.  

At a speech for the Confederation of British Industry (CBI)’s business dinner, chief executive Rain Newton-Smith will slam the government’s decision to add to an estimated £345bn business tax bill over the last two Budgets. 

Newton-Smith is set to say that decisions to raise national insurance contributions (NICs) for employers and forcing through minimum wage increases have not been “free of consequence”. 

She is expected to add that businesses are not a “cash tap” while hitting back at Labour MPs by saying that “you cannot tax your way to growth”. 

She will say: “You cannot fix the cost of living without fixing the cost of doing business. And the cost of doing business is reaching a tipping point.”

Her comments will also touch on CBI research suggesting that various business tax bills add up to £345bn being paid into government coffers from the private sector in the last financial year. 

The biggest generator of income from businesses is now employer NICs at £123.1bn compared to 103.1bn for corporation tax. 

Intake from Employer NICs rose by 27.6 per cent year-on-year while business tax revenues rose by around 12.7 per cent, according to industry researchers. 

The increase was caused by Chancellor Rachel Reeves’ decision to hike employer NICs in her first Budget by lowering the salary threshold and raising the rate of tax, with the government opting to fund large pay increases for doctors, train drivers and teachers. 

Over her first two Budgets, Reeves cumulatively raised taxes by some £66bn while government borrowing has also jumped after the Chancellor loosened fiscal rules to invest in infrastructure. 

Newton-Smith’s address will come against a gloomy backdrop of political uncertainty and an energy price shock triggered by the Iran war. 

Economists at the Office for Budget Responsibility appeared to warn the government that it would revise up its government borrowing estimates after it missed a previous forecast by some £65bn following the gas price shock from Russia’s invasion of Ukraine in 2022. 

City analysts have also cast doubt over the government’s policies to protect the UK economy from further damage, with JP Morgan analysis suggesting that Reeves’ ‘summer savings’ package would have minimal effect on curbing an expected rise in inflation. 

The OECD also singled out the UK for being particularly vulnerable to a rise in oil and gas prices since March. 

Newton-Smith will also hit out at turmoil within the Labour Party, telling MPs to look “outwards not inwards” during power struggles. 

She will also say that the political infighting was hitting investment and damaging confidence. 

“Business cannot afford a summer of stagnation while the politics play out. There is a real, material cost to what’s happening in Westminster now.”