Business criticism of Budget tax hikes proves Labour’s misplaced the plot, says ALEX BRUMMER

The dissonance arising from last week’s tax-and-spend Labour Budget shows no signs of abating. 

Confidence in the Government among business and financial leaders, courted assiduously by Rachel Reeves before and immediately after the Election, is dissolving fast. 

As worrying to Reeves, the loosening of the Government’s fiscal guardrails is among the factors slowing the path to lower interest rates. 

That matters to homeowners, shoppers and enterprises across the nation. All reductions in Bank of England borrowing costs are welcome. 

The latest reduction from 5 per cent to 4.75 per cent in the base rate will be a relief. But computer models are being updated in the City following revisions to growth and cost of living forecasts. 

Shrinking: Confidence in the Government among business and financial leaders, courted assiduously by Rachel Reeves before and immediately after the Election, is dissolving fast

Hopes of a December cut have retreated and few expect rates to bottom out until early 2026 rather than next year. 

A big new uncertainty is the consequence of the result of the American presidential election, on which Governor Andrew Bailey declined to be drawn. 

Unless Donald Trump’s ‘efficiency’ czar Elon Musk can find a way to brutally cut trillions of dollars off the federal budget, then renewal of the president-elect’s past tax cuts will, in the first instance, keep market and official interest rates higher than previously predicted. 

Disappointment about the pace of UK interest rate reductions is not just coming from free market advocates. 

The leftist Institute for Public Policy Research is also demanding the Bank ‘go further and faster’. 

The one glimmer of hope for those wanting a bolder Bank supporting a robust recovery was the near unanimous 8-1 vote on the interest-rate setting Monetary Policy Committee. American economist Catherine Mann was the only hold out.

Several of Britain’s listed companies are warning that the Budget is going to make life harder for financial performance and consumers alike. 

The nation’s second largest supermarket, Sainsbury’s, cautions that food price shocks are not over as it wrestles with a £140million rise in its tax bill because of the raid on employer National Insurance. 

BT says it faces extra costs of £100million and broadcaster ITV cautions that advertising revenues face a hit. Meanwhile, farmers continue to raise merry hell over the imposition of death taxes.

Pension fund reforms, which Reeves has yet to unfurl, are unlikely to generate much confidence that a new wave of entrepreneurship can be unlocked any time soon. 

At a large gathering of City advisers and corporate chieftains this week, it was almost impossible to find anyone who believed Reeves had done anything or would do anything to bolster enterprise. 

The great last hope seemed to be Donald Trump and a big revival in the mergers and acquisitions market. That would be great for the earnings capacity of investment banks and other advisory firms. 

But it could also see more of Britain’s undervalued FTSE 350 firms disappear into foreign and private equity hands. Tragic. 

Pharma pain 

Astrazeneca and its chief executive Pascal Soriot are losing friends fast in the investment community over its share price fall after its problems in China. 

It is disturbing that investors only learnt the extent of the trouble, including the detention of the head of its Chinese operations Leon Wang, from local news reports.

The sentencing of as many as 100 staff on fraud charges suggests something seriously wrong in the country, which is the second largest generator of sales after the US. 

Soriot apparently thinks the less said the better for fear of damaging carefully cultivated relations with Beijing, which abhors adverse publicity in the West. 

That doesn’t mean that the company is not seeking to douse the flames. It is understood to have assembled a team of negotiators, including legal experts, to urgently resolve matters. 

A call with City analysts earlier this week, which focused on allegations surrounding its ground-breaking cancer drug Tagrisso, failed to assuage concerns. 

The usual response of FTSE firms to unexpected events is to set up an ‘independent’ inquiry to calm nerves. 

But there is nothing normal about doing business with a secretive, authoritarian regime with total control over media and the judiciary