Sir Keir Starmer’s resignation as Prime Minister and leader of the Labour Party marks another moment of political upheaval in our fair country that has seen far too many of them in recent years. Less than two years after Labour’s landslide general election victory, the Government now faces a leadership contest, a period of uncertainty, and an unavoidable question: what does it do next?
For those of us who advise businesses, entrepreneurs and individuals trying to make long-term decisions, the answer matters. Political change is rarely welcome if it simply adds to uncertainty. But it can be useful if it creates the space for a serious reset. And, on economic policy, in my opinion this Government needs one.
The manifesto straitjacket
The problem is not that Labour entered office without economic ambition – the 2024 manifesto was full of language about growth, stability, investment and renewal. It promised a partnership with business, an industrial strategy, planning reform, and a commitment to make Britain more attractive for long-term investment. Those were worthy aims. The difficulty was that they sat alongside a set of tax pledges which were always likely to become a constraint in government. The pledge not to increase the rates of income tax, national insurance or VAT narrowed the options available to the Chancellor from day one. The commitment to cap corporation tax at 25% just added to the inflexibility. This left all other areas of the tax system massively open to speculation.
The result has been a government trying to talk about growth while operating within a fiscal framework largely designed for campaign reassurance rather than governing reality. In the real world, this has encouraged uncertainty, rumours and reactive policy-making — precisely the conditions that businesses dislike most.
Tax policy needs to support growth, not just raise revenue
Tax is not merely a mechanism for raising revenue. It is also a signal. It tells business owners whether government understands risk. It tells investors whether the UK is a predictable place to commit capital. It tells entrepreneurs whether success will be encouraged or punished. And it tells internationally mobile individuals and businesses whether Britain wants them to stay, invest and build here.
That is why ill-conceived tax policy pledges can do real damage even before legislation is introduced. If businesses believe that headline pledges are forcing a government to search around the edges for revenue, they will expect more complexity, more targeted anti-avoidance, more sector-specific charges, and more changes to capital taxes. They may delay investment, defer transactions, postpone hiring, or simply become more cautious.
That caution matters. The UK does not have the luxury of treating business confidence as a nice-to-have. We need private investment, productivity growth, innovation and employment. We need owner-managed businesses to feel that expansion is worth the risk. We need international capital to see the UK as stable, pragmatic and open. And we need a tax system that is coherent enough to support those aims.
The reset should be honest and practical
The new Prime Minister should resist the temptation to pretend that nothing has changed. The country would be better served by a clear and honest economic reset: one that acknowledges fiscal pressures, explains the choices ahead, and places growth at the heart of tax policy rather than treating it as an afterthought.
That does not mean abandoning fiscal responsibility. Quite the opposite. Credibility matters (just ask Liz Truss!). But credibility is not the same as being trapped by poorly framed manifesto promises. A sensible reset would distinguish between protecting working people from broad-based tax rises and designing a tax system that encourages enterprise, investment and productivity.
It should also provide certainty. If reform is being considered, the Government should explain the principles and timetable. What damages confidence most is not always the tax rise itself; it is the slow drip of speculation, denial, kite-flying and eventual surprise. The last two Budgets have been very clear examples of this.
What business will be looking for
Businesses will not expect miracles from a new Prime Minister. They will, however, look for signs that the Government understands the link between tax policy and economic behaviour. A reset should therefore focus on a few practical priorities.
- Stability: fewer surprise announcements and a clearer forward tax roadmap.
- Simplicity: a commitment to reduce complexity where possible, rather than layering new rules on top of old ones.
- Investment: tax policy that supports capital expenditure, innovation, scale-up activity and long-term ownership.
- Enterprise: recognition that entrepreneurs and family businesses respond to incentives, risk and certainty.
- International competitiveness: a clear message that the UK wants to attract people, capital and ideas.
None of this requires radical ideology. It requires competence, consultation and a willingness to treat tax policy as part of an economic strategy rather than a series of short-term revenue measures (but then I would say that – I’m an accountant!).
A political problem, but also an opportunity
Sir Keir Starmer’s departure is plainly a political setback for Labour. It reflects frustration within the party and concern about its electoral prospects. But leadership changes can sometimes create permission to revisit assumptions that have become unhelpful. The manifesto tax pledges may have helped Labour reassure voters during the election campaign, but they have also contributed to a sense that economic policy is boxed in.
My hope is that the next Labour leader, whoever that may be, uses this moment not simply to change the face at the top, but to reset the economic conversation. The UK needs growth. Growth needs confidence. Confidence needs clarity. And clarity starts with a tax policy that is honest, coherent and designed for the real world.
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