Businesses’ warning shot to Boris Johnson and Rishi Sunak ahead of Conservative Party conference

oris Johnson was warned on Friday that he needs to do more to show he is pro-business after tax hikes threatened the Conservatives’ claim to be the party of enterprise.

Just days before the start of the Tories’ annual conference in Manchester, business figures and Conservatives voiced concerns over plans to increase National Insurance from next April and corporation tax from 2023.

The tax rises threaten to set back relations between Mr Johnson and the corporate sector which have improved significantly since Brexit thanks largely to the Government’s £400 billon Covid support package.

But with the £70 billion furlough scheme closed and the economy hit by the fuel crisis, labour shortages and inflation, some business leaders are worried that the Tories are not doing enough to incentivise investment.

“This Government claims to be pro-business, but frankly it’s recent tax changes do not support that thesis,” Michael Spencer, the City entrepreneur and Tory peer told the Evening Standard. “They need soon to show real pro-business and pro enterprise moves or inward investment will evaporate with profoundly negative implications for growth and productivity’.”

Matthew Fell of the CBI added that business was eyeing Chancellor Rishi Sunak’s October 27 Budget nervously. He said: “The hike in corporation tax followed by the rise in National Insurance have been hard to swallow. Any more costs in the fiscal events this autumn will be tough to take.”

That mood was echoed by one of Mr Johnson’s own ministers, Jacob Rees-Mogg, who told the Telegraph today: “If we are to have a strong and growing economy, we are taxed as highly as the country can afford.”

The Institute of Directors is also set to report a sharp drop in business confidence over the past month following the NI rise. David Gauke, a former work and pensions secretary under Theresa May, said Tory values of low regulation, low taxation and being pro-business had been upended by the pandemic.

“The way they are trying to make sums add up is to tax businesses,” Mr Gauke said. “After years and years when corporation tax was falling for it to rise from 19 to 25 per cent is significant.

“Government thinks business got a lot of help during the pandemic and so they should pay a greater price in recompensing the Government.”

Pro-Brexit Tory MP David Davis added: “Conservatives are supposed to be the party of low tax, deregulation, fiscal responsibility… We have to get back to that and quickly.” One senior Tory close to the Government acknowledged that relations between No 10 and business had been strained.

“There’s inevitable tension across the board with businesses that want to recover,” the senior Tory said. “They are wondering how can they get over cliff edges with business rates, rents, furlough, VAT. They are concerned about the National Insurance rise. But we have got to get the balance right between trying to balance the books and not choking off the recovery. We are still a pro-business party but we are not going to balance the books on the backs of the lowest paid.”

Relations between No 10 and business are on a better footing than three years ago when Mr Johnson was reported to have responded to worries over a no-deal Brexit by saying “f*** business”.

This year Mr Johnson and Mr Sunak have been holding regular meetings with a group of 30 chief executives, called the Build Back Better Council.

One government official told the Standard the meetings had helped build up goodwill with business leaders. But having spent so much public money to support workers and businesses during Covid, ministers want businesses to work with Mr Johnson to deliver on his promise to “level up” the country.

“There’s certainly an understanding from businesses that they have a massive role to play,” the official said. But one city insider was critical of the council: “It is unwieldy. The meetings are infrequent and very superficial.”