Rachel Reeves faces a frosty reception at the CBI summit

At the beginning of the year, Rachel Reeves was being praised all round for her efforts repairing relations between the Labour party and business. In February, the Chancellor hosted a business conference – attended by leading figures – where she pledged to cap the headline rate of corporation tax at its current rate of 25 per cent if Labour entered government. Since her party’s election triumph, Reeves has stuck to her word on that promise – although other announcements from the Chancellor have caught the business community by surprise and led to strain.

It means that Reeves will face a frosty reception when she appears at the Confederation of British Industry (CBI) conference today. The No. 10 grid plan for the week is the employment white paper – which will set out plans to reduce the number of Britons on benefits and get people back into work. Yet in a case of bad timing, Reeves must first hear from business leaders on why they believe her tax-raising Budget will reduce their ability to employ workers in this country.

CBI CEO Rain Newton-Smith will say that ‘margins are being squeezed and profits are being hit’ and when you ‘hit profits, you hit competitiveness, you hit investment, you hit growth’. A survey by the CBI of 266 businesses said 62 per cent will hire fewer new people and 48 per cent will cut their existing staff as a result of Reeves’s decision to raise employers’ national insurance.

In response, Reeves is expected to use her appearance at the event (which Tory leader Kemi Badenoch will also attend) to say she had no choice but to raise tax on business and argue that those complaining are yet to put any viable ‘alternatives’ to her plans on the table. She will say: ‘I stand by those choices as the right choices for our country: investment to fix the NHS and rebuild Britain, while ensuring working people don’t face higher taxes in their payslips’.

Yet this statement from the Chancellor points to the potential problem coming down the track. While Labour’s preferred version of ‘working people’ won’t face higher taxes in their payslips right now, the measures she announced in her Budget could still cost them in the medium term. It’s not just fewer jobs – businesses are warning of potential redundancies. The anaemic growth forecasts do not make happy reading for the Chancellor, given she has said her government is predicated around economic growth. If Reeves cannot deliver this, more difficult decisions loom on spending and tax.