Bank of England raises alarm over new tax raid
The Bank of England has warned that fears of another tax raid from Labour are already impacting the economy as it kept interest rates on hold at 4pc.
Its latest survey of businesses described “consumer caution” as a “key theme”, with “some now worrying about potential impacts on confidence from the upcoming autumn Budget”.
The poll showed many bosses blamed the Chancellor’s £25bn national insurance raid for the faltering jobs market.
Bosses also warned that Rachel Reeves’s inheritance tax raid on farmers and entrepreneurs in the Budget last autumn was having a chilling effect on the economy.
It said: “Family and individually owned private businesses are concerned about changes in inheritance tax laws making them less willing to invest”.
It came as policymakers held interest rates at 4pc following last month’s cut from 4.25pc, warning that price rises would limit its ability to reduce the cost of borrowing further.
Andrew Bailey, the Governor, cautioned that the economy was “not out of the woods” in terms of keeping a lid on price rises, as businesses surveyed by the Bank said they were worried about further tax rises in the Budget.
In a highly anticipated move, the Bank also said it would scale back its sales of long-term debt amassed during lockdown and the financial crisis in a move that will ease pressure on Rachel Reeves.
The Bank will reduce its stockpile of government bonds by £70bn in the coming year, down from £100bn over the past 12 months.
However, Bank policymakers warned of a deteriorating economy and a jobs market that has ground to a halt, with two of the nine members of the Monetary Policy Committee (MPC) calling for an immediate rate cut to prop up growth.
Mr Bailey said: “Although we expect inflation to return to our 2pc target, we’re not out of the woods yet so any future cuts will need to be made gradually and carefully.”
[Source: Daily Telegraph]
