Ahead of the UK’s Autumn Budget in November, UK wealth manager Rathbones has outlined five recommendations to boost investment and drive growth.

The clock is ticking down towards Rachel Reeves, UK Chancellor of the Exchequer, issuing her annual Budget speech on 26 November. There's been a relentless level of speculation about the tax hikes that are said to be coming. 

Over at Rathbones, the wealth manager, it has recommended five main actions that the embattled Labour finance minister should take.

The firm's research, entitled Building Prosperity, examines five policy areas facing Reeves: pensions, wealth taxation, business tax, public investment, and property taxation.

The wealth manager argues that only a bold, investment-led approach can break the cycle of weak growth and rising tax pressures that have hampered the UK economy for years.

“Our clients are the people whose ambition and success underpins the prosperity of businesses, organisations and communities across the UK,” Camilla Stowell, CEO for wealth, said. “If they aspire and succeed in their professional lives, businesses and personal decisions, the whole country stands to gain. But many now feel anxious about the future, worried about their ability to live well in retirement, support their families, or grow their businesses.”

“We worry that the government may lose sight of the need for aspiration, and to support and encourage people to strive, build and succeed – because this is how the economy and country will succeed and grow,” she continued. “Short-term tax changes which undermine this may ultimately further slow economic growth.”

(Editor's note: The Budget comes at a time when UK economic growth has been lacklustre, and Reeves has tried and failed to make significant welfare spending cuts – opposed by her own backbench Labour Party colleagues. Although she ruled out rises in income tax, for example, prior to the 2024 general election, there is speculation that she could change course to give herself "fiscal headroom" and contain rising borrowing costs. The danger is that such a hike will damage the government's re-election chances. Labour currently, like the former ruling Conservatives, is trailing the insurgent Reform Party in the opinion polls. Another problem is that tax hikes made already, for instance to National Insurance on employers – a form of payroll tax – are said to have hit growth and revenues, creating a potential "doom loop." The government is also pushing ahead with ending the centuries-old resident non-domicile system, and is widening the net of inheritance tax so that it will now affect family-owned businesses and farms above a certain threshold. The decision to hold a budget as late as the end of November has also created more time for the rumour mill to whirl over what Reeves will do, encouraging investors and business leaders to hold fire because of uncertainties.)

In its analysis, Rathbones calls on the government to:

Boost investment through the pension system 
The firm calls on the government to strengthen incentives for pension saving and avoid cuts to higher and additional rate tax relief. It estimates that reductions could reduce pension saving from higher-rate taxpayers by over £50 billion ($65 billion) over five years, threatening investment in UK businesses and the retirement security of millions.

Reform business taxation
Rathbones calls for more generous capital allowances and a reformed business rates system to encourage entrepreneurship and investment. The firm estimates that extending 100 per cent capital allowances to all business investment could add up to £60 billion to UK GDP.

Support regional and sectoral investment
The government should prioritise public investment in regions and sectors that need it most, particularly in transport and energy infrastructure, to address regional inequalities and high energy costs and increase support to businesses to encourage private sector enterprise and growth in the regions.

Resist further taxes on wealth
Proposals for new taxes on wealth are a disincentive for highly mobile business owners and professionals to come to or remain in the UK. Rathbones estimates that an annual wealth tax could drive over £100 billion out of the UK or into less productive assets, undermining investment and growth.

Reinvigorate the housing market
Stamp duty land tax is suffocating activity in the housing market, stifling the mobility of individuals across the country and discouraging private spending and investment. Abolishing or reforming this and other taxes on housing, could increase household mobility by over 25 per cent it believes, equivalent to 300,000 additional home transactions a year.

“Our analysis shows that the right policy choices now could unlock billions in investment and help secure the UK’s long-term prosperity. But short-term fixes like cutting pension tax relief or introducing a wealth tax risk draining capital from the very businesses and individuals who drive growth,” Oliver Jones, head of asset allocation at Rathbones and author of the analysis, said. “The government should focus on creating a stable, predictable environment that encourages people to save, invest, and build for the future.”

The statement comes ahead of the Autumn Budget where Reeves could introduce further tweaks to IHT exemptions, following changes to pension taxation and the business and agricultural land reliefs she has already targeted. Rumours include the suggestion that Reeves could introduce a gift cap and/or changes to the tapering rules on gift allowances. There have also been reports that she is considering axing the primary residence nil rate band exemption. See more here.