With just two weeks to go until chancellor of the exchequer, Rachel Reeves, delivers her first budget, Labour officials have signalled that their plans for the economy will break a key manifesto pledge.
Prime Minister Sir Keir Starmer yesterday twice refused to rule out raising employers’ contributions to national insurance (NIC), one of the two main sources of taxation on income in the UK. After admitting that the budget would be “tough,” Starmer suggested a purposefully deceitful Labour manifesto promise was not being broken, since it ‘only’ vowed not to raise taxes on “working people”—who he has mindlessly categorised as those without any savings—rather than on employers.
But experts have argued that hiking employers’ NICs will act as a tax on workers, despite the manifesto pledge. Private investor Mike Ridyard wrote that companies should be expected to cut costs and raise prices “to mitigate the increased costs,” while Helen Miller, who is head of tax at the Institute for Fiscal Studies, said employer NICs “are a tax on the earnings of working people”:
In the long run, expect the majority of a rise in employer NICs to be passed on to workers in the form of lower wages.
The BBC agrees that raising employer NIC contributions breaks Labour’s election manifesto pledge, highlighting that the hike can be viewed as a “tax on jobs.”
Hospitality bosses have also stressed that they will struggle to afford the cost “when they’re already managing increases in other areas like wages, food, drink and energy.”
Reports say that Reeves is set to initiate £40 billion (€47.8bn) worth of tax increases and spending cuts in total in her budget on October 30th. The chancellor has been sowing the seeds of significant tax hikes since just after the general election, at which time she said Labour’s economic inheritance was worse than expected.
Reeves told the Cabinet this week that
the budget will be about protecting working people, starting to fix the NHS and rebuilding Britain. We cannot turn around 14 years of damage in one budget, but we can start to deliver on our promise of change.
Commenting on the expected employer NICs rise, Conservative MP Laura Trott responded: “Only a day after their first investment summit, the prime minister and chancellor are choosing to sow further uncertainty and chaos for businesses by opening the door to a new jobs tax.”
