The Budget must pair fiscal discipline with a new bold, pro-business plan in order to turbo-charge economic growth and end the tax-and-spend Budget doom loop.
A credible growth plan is the only path to a fiscal dividend later in this parliament – creating the conditions to roll back this Budget’s tax rises as growth strengthens.
The Tony Blair Institute for Global Change has today published A Growth Bargain for Government and Business, arguing the chancellor must couple any tax raising measures to restore fiscal discipline with a package of pro-business reforms that hard-wire growth into every major policy decision – making the UK a better place to invest, work and build.
Any large tax rises should be temporary: a measure to rebuild credibility now, not a permanent shift in policy and as a key component of a wider plan to drive broader growth. The chancellor should make clear that, as growth returns and public-sector reforms take effect, the priority will be to reverse these rises – turning short-term discipline into the foundation for recovery and pre-election tax cuts.
A pro-business growth plan: four priorities for recovery
TBI is calling for a Budget that sends a clear message – that Britain backs business – with four urgent priorities:
Reform taxes to reward enterprise
Extend full expensing across asset classes, overhaul property and business taxes, and send a clear signal that Britain is open for investment.
Retain a flexible jobs market
Make migration policy more responsive to economic need and modernise employment law – including amending the Employment Rights Bill and simplifying protections for higher-income workers – to keep Britain’s labour market open, flexible and pro-growth.
Build faster
Go further with planning reforms and introduce zoning, including to give automatic permission for higher-density housing near transport hubs and fast-track nationally significant projects such as AI data centres.
Digitise government support for business
Use AI tools, digital IDs and a tech-adoption platform to cut red tape and help smaller firms grow faster.
Updating the OBR framework to support growth
TBI also proposes a targeted reform to end the growth conservatism in the current system, where the OBR credits only policies with robust historical evidence. The Treasury should provide the OBR with an Upside Policy Scenario showing the full impact of its growth plan, enabling an alternative forecast alongside the baseline that the OBR would independently assess. This would preserve the OBR’s independence and credibility while allowing more forward-looking reforms to shape fiscal analysis – shifting the focus from what can be easily measured to what will drive growth in a fast-changing world.
Tom Smith, Director of Economic Policy at the Tony Blair Institute, said:
“This Budget demands a clear break from the past year – a step change that makes growth the purpose of government, not one objective among many.
“The chancellor acknowledges she has tough choices to make. She cannot satisfy the markets, the party, business and voters all at once. The only way to do so over time is to put Britain back on the path to growth – and that means a new bargain between government and business.”
“A credible Budget can’t just raise taxes – it must raise Britain’s sights. The government needs to show fiscal discipline, but also the confidence to back business.
“Only a bold, pro-enterprise plan can lift living standards, strengthen the public finances and give the government the fiscal room for the changes voters want. Progressive policy tomorrow demands a pro-business growth plan today.“