ICAEW chief: Britain can’t build a better economy one Budget at a time

To achieve sustainable economic growth, the government must move beyond short-term Budget fixes and provide businesses with long-term certainty through tax stability and regulatory reform, says Alan Vallance “You can’t invest what you don’t have or when you are unsure what extra tax or regulatory burden is around the corner.” That was how one of our members summed up what businesses need from the Chancellor’s forthcoming Budget. It captures something I hear repeatedly from business leaders: the frustration of being asked to deliver growth, while facing rising costs, higher taxes and growing regulatory demands.

The scale of that pressure is clear in our latest Business Confidence Monitor . Business confidence has now been negative for seven consecutive quarters, matching the longest uninterrupted period since the global financial crisis. For many businesses, that means postponing investment, putting recruitment on hold and diverting resources away from growth simply to absorb rising costs. I recognise the difficult choices facing the Chancellor, but when the public finances are under pressure, we cannot afford to see businesses simply as another source of revenue.

They are also the engine of the growth on which those revenues depend. As finance leaders, business owners and trusted advisers, our members see these pressures first-hand across the country. In our polling ahead of the Budget, more than two-thirds of respondents said greater certainty over tax and business regulation would make them or their clients more likely to invest over the next three years. Give businesses breathing space That should give the Chancellor pause for thought.

Policies that discourage investment and hiring risk making his fiscal challenge harder, not easier. This Budget is an opportunity to stop adding to those pressures and give businesses the breathing space they need to grow. The Chancellor should start by ruling out further increases in employment taxes during this Parliament and freezing the business rates multiplier for 2027/28, while committing to wider reform of a system that too often penalises expansion.

Reducing costs is only part of the answer. Businesses also need confidence that the economic and tax environment will remain stable enough for them to plan ahead. Greater clarity over the government’s fiscal rules, including what constitutes “current budget balance”, would help avoid unwelcome surprises for markets. There is also much the government could do to make running a business easier. Improving HMRC’s performance would reduce the delays and unnecessary costs businesses face, while expanding the Growth Guarantee Scheme would help smaller firms access the finance they need to invest and grow.

None of this requires the Chancellor to abandon fiscal discipline. It means recognising that stronger businesses and healthier public finances go hand in hand. Yet the problems facing British business cannot be solved through one Budget alone. Britain’s increasingly complex tax system is already holding back growth and risks becoming unfit for the economy of the future without fundamental reform. Successive Budgets have added rules, thresholds and reliefs, often without enough consideration of how they fit together.

The result is one of the world’s most complex tax codes, one that has grown more than fourteenfold over the past 50 years. At the same time, the economy our tax system needs to support is changing rapidly. AI, shifting demographics and weak productivity growth raise difficult questions about where future tax revenues will come from and how we fund public services. We cannot assume that a tax system built up through decades of piecemeal changes will be fit for an economy undergoing profound transformation.

That is why we have established the Future of Tax Commission, an independent body chaired by former Treasury Minister Mark Hoban which begins its two-year programme of work in January 2027, to examine what a better tax system should look like and how we might get there. This Budget can give businesses room to breathe. But securing Britain’s long-term prosperity means looking beyond individual Budgets and asking how our tax system can better support growth and sustainable public finances.

At ICAEW, we have begun that work. I want government, businesses and policymakers to be part of it. We have an opportunity to think seriously about the tax system Britain will need in the decades ahead, and we should not waste it. Alan Vallance is chief executive at ICAEW