Britain's small businesses have reacted angrily to revelations that Work and Pensions Secretary Pat McFadden privately told Lord Mandelson that every Labor meeting was consumed by the question of “who can we tax to pay for benefits”, with one CEO declaring that the country was “rearranging the deck chairs on a very expensive, high-tax ship”.
The message, which was sent in May 2025 when McFadden held the Cabinet Office, was among more than 1,000 pages of letters released following the disclosure of the Conciliation Statement forcing the disclosure of communications with the former US ambassador. In it, the minister bluntly tells Mandelson that his colleagues are “asking the wrong questions”.
A spokesman for McFadden said the minister “fully followed the Conciliation Speech and got all the messages across”, adding that his only contact with Lord Mandelson since the government left was to urge him to “think about the victims in all this and apologize to them”.
For business owners facing the biggest UK tax burden in seven decades, however, the leaked exchange confirmed a long-held suspicion: that the Treasury sees business as a money machine rather than an engine of growth.
Paul Denley, chief executive of London-based Oakham Wealth Management, said the comments reflect a political stalemate that is stifling investment.
“Every government inherits problems. The test is whether you reach for the same tired tools or have the mindset to do something different. Too often, the focus seems to be on redistribution instead of growth, innovation and wealth creation,” he said.
“The concern is that taxation has become a policy response to almost every challenge. Successful economies do not grow by continuing to redistribute a fixed pool of wealth. They grow by encouraging entrepreneurship, investment and productivity.
“At some point, the conversation has to shift from how we divide the pie to how we make it bigger. Otherwise, we risk managing decline rather than creating prosperity. Without a strong focus on growth, we're simply rearranging the deck chairs on an expensive, high-tax ship.”
His concern stems from hard numbers. The Office for Budget Responsibility now puts taxes at a 70-year high of around 37 per cent of GDP, the highest rate since records began in 1948 – a trajectory that has only sharpened since Rachel Reeves signed off on new tax hikes to plug the £40bn Budget black hole.
Graham Nicoll, chartered financial planner at NCL Wealth Partners, said McFadden's message will resonate with anyone running a small business.
“Pat McFadden's reported comments reflect the frustration seen by many business owners, the idea that, as the government faces financial pressure, businesses, entrepreneurs, investors and high earners are often seen as the first source of additional tax money,” he said.
“The concern is not about paying taxes, but about the cumulative effect of repeated tax increases and policy changes affecting confidence, investment attractiveness and the growth of the broader economy.
“By increasing a system that rewards unemployment and can encourage unemployment, the balance is not right. Government should focus on encouraging people to develop skills, aspire to contribute and reap the rewards – and encourage growth rather than inhibit it.”
That argument is reinforced by the latest figures from the Office for National Statistics, which show that more than a million 16 to 24-year-olds are not in education, employment or training, and youth unemployment has reached 16.2 per cent – the highest rate since 2015.
Tony Redondo, founder of Newquay-based Cosmos Currency Exchange, did not respond to an audit of management's record so far.
“This sums up the economic illiteracy of this government. They are not concerned at all about wealth creation,” he said.
“The costs of this myopia are stark: record numbers of unemployed or uneducated youth, record taxes, an economy on its knees, unemployment at 5 percent and rising, and government borrowing costs that have just reached levels above those that caused the collapse of Liz Truss in 2022.
“The Tories deserved a good kicking at the last election, but the country does not deserve this government apology. Two years into Labor's first term in office in 15 years, they are behaving like Manchurians, determined to destroy the UK inside and out.”
Michelle Lawson, director of Fareham-based Lawson Financial, focuses on the impact on those who keep the lights on.
“This makes me very sick. Millions of people in the UK of all ages get up every day to go to work, and some have multiple jobs to pay the bills,” she said.
“The workers complain about their speeches about the importance of business but this shows a lack of knowledge and a misunderstanding of the basics. In two years they have been able to do what no other government has done, they ended up being very unpopular and very despised, yet the Prime Minister has not received the memo.
“With all the points in these papers, there should be plenty of pressure to give him and the Chancellor. The damage they've done is still repairable but it goes hand-in-hand with other concerns. Rather than taxing almost every possible segment, looking at the systematic root of these problems and a good review of how they're spending money might help. Another good mess we've gotten ourselves into.”
His view echoes that of the Federation of Small Businesses, which has spent recent months lobbying the Treasury over the suspension of 104,000 small businesses from business tax revenue by April 2026.
Steven Greenall, director of Greenall Estate Planning, gave the most blunt verdict of all: “Workers are doing everything they can to be comfortable in winning the next election.”
For Sir Keir Starmer's government, the political risk is that McFadden's message falls short of a Whitehall mindset that is asking bluntly who will be taxed next rather than boosting the economy from crisis. For Britain's SME owners – the Labor constituency has spent two years in opposition – the dossier reads less as a leak and more as a confirmation.
