Disappointing economic news emerged last week, revealing that the UK economy has shrunk under Labour. Businesses and individuals alike seem to be bracing from the impact of Rachel Reeves’ recent budget, with fear and uncertainty undermining confidence across the board.

In recent weeks and completely unprompted, several businesses in Liskeard have raised concerns with me about the effects of this budget, particularly the hike in Employer National Insurance Contributions (NICs). Local businesses worry about the direct financial cost to their operations and the broader chilling effect on business confidence.

The independent Institute for Fiscal Studies estimates that the increase in employer NICs will cost businesses an additional £900 for every employee earning the median salary. Further analysis I saw last week forecast that these changes will raise £23.8-billion in 2025/26. But this doesn’t account for knock-on effects such as reduced employment, lower wages, and declining profits. After factoring these in, the net tax gain is expected to fall to £13.6-billion.

It's not just the private sector that’s facing the pinch, public sector employers will face £4.7-billion in additional costs due to higher NICs, which will likely lead to higher council tax for residents as councils pass on these costs. Like many town and parish councils, we are currently setting our budget for next year, and one significant cost increases is the higher employer NICs we will have to pay to the government. This will likely have to be reflected in the council tax bills for next year.

This economic contraction comes as a stark contrast to the strong growth the UK experienced earlier this year, when it was a leader in the G7. Labour officials seem to argue that the weak numbers reflect the underlying growth rate of the economy rather than the immediate impact of the October budget. However, the £40-billion in tax rises, tightened fiscal rules, and front-loaded spending announced by Rachel Reeves paint a worrying picture for the future.

Labour came to power promising to prioritise economic growth. Yet this budget seems to have abandoned those ambitions. Consumer confidence remains low, as GfK’s December survey highlights, and business sentiment has nosedived. The BDO business optimism index recorded its sharpest monthly drop since 2021, falling to its lowest level in nearly two years.

What does all this mean for us here in South East Cornwall? It means reduced business and consumer confidence, higher council taxes, and fewer well-paid jobs. And while we face these challenges, Labour’s overly unachievable housing targets risk driving speculative development in our communities without regard for local needs.

Where is the Labour Party that once championed economic growth and promised to “grow the cake” to fund our vital public services? Instead, we’re facing rising taxes and the likelihood of less funding for public services after 2026 unless there is a dramatic turnaround. For our communities, this is not the growth we were promised — it’s a step backwards.

Nick Craker

Conservative Cornwall councillor for Liskeard