You WILL pay extra after the Budget: Rachel Reeves admits ‘working folks’ will face tax rises whereas companies will probably be hit by nationwide insurance coverage hike of as much as two per cent ‘to fund NHS’
Rachel Reeves admitted that ‘working people’ will face tax rises after the Budget, while firms will be hit by a national insurance hike of up to two per cent.
‘It’s not possible to close the gap in our public finances without having to make difficult decisions,’ the Chancellor told LBC last night, asked whether some working people would face higher taxes after next week’s Budget.
‘I’m making the choice to not increase the key taxes that working people pay.’
Labour faces fierce backlash over the apparent U-turn on tax, having pledged in its manifesto that working people would not face higher contributions.
The Prime Minister was pressed to define ‘working people’ this week amid concern over where the tax burden would fall, and suggested shareholders and landlords might not covered by the pledge.
The tax burden for firms is expected to fall exclusively on the private sector, with public sector employees being reimbursed by the Treasury to avoid cuts.
Firms can expect national insurance rates to increase by up to two per cent in the Autumn Budget next week in an effort to help fund NHS investment and repair Britain’s finances.
Ms Reeves is expected to raise national insurance rates by up to two per cent in the Budget
File. The NHS stands to gain an additional three to four per cent in funding from the Budget
The Chancellor is looking to find £40 billion for public spending, sourced largely from tax hikes rather than spending cuts.
Employers will be expected to find an extra one-to-two per cent on the current rate of 13.8 per cent.
Such a hike will not directly affect employees, but business leaders have warned that the extra expense will stagger growth and result in lower wages as firms push the additional cost onto workers.
Ms Reeves is separately expected to make a ‘significant’ cut to the thresholds at which employers start making national insurance contributions.
Between them, the changes are hoped to raise around £20 billion.
About half of this is expected to go towards urgent NHS improvement, expected to receiving a funding boost of between three and four per cent in the Budget.
This would come to around £10 billion a year.
Tax hikes could go hand-in-hand with a change to the government’s fiscal rules about borrowing, allowing her to raise an additional £50 billion for public investment, revealed to Sky News on Thursday.
Ms Reeves stopped short of applying national insurance contributions to employers’ pension contributions amid fears such a policy would leave people worse off after retirement.
The move could have raised an additional £10 billion.
The Chancellor insisted on Friday that the tax grab was not in contravention of Labour’s original manifesto pledge, however.
‘We made a clear commitment in our manifesto not to increase the key taxes that working people pay, National Insurance, income tax and VAT,’ she maintained.
Her comments came after the Prime Minister was pressed to define a ‘working person’ per the manifesto.
Asked on Sky News whether ‘someone who works but gets their income from assets as well, such as shares and property’ qualified, Sir Keir Starmer replied: ‘Well, they wouldn’t come within my definition.’
He defined working people somebody who ‘goes out and earns their living, usually paid in a sort of monthly cheque’ but they did not have the ability to ‘write a cheque to get out of difficulties’.
‘I think people watching this will know whether they’re in that group or not,’ he added.
But amid public backlash, Downing Street was forced to clarify that Sir Keir had meant people who ‘primarily get their income from assets’.
‘He’s accepting that people have some savings. Those might be cash savings, or stocks and shares ISA savings or whatever,’ the Prime Minister’s spokesperson said.
‘So it’s not precluding people that have a small amount of savings. Those individuals clearly are working people.’
The PM was asked to clarify what a ‘working person’ was amid backlash over tax hikes
File. No10 clarified that people with ‘a small amount of savings’ are still ‘clearly working people’
Sir Keir was also asked whether he was ‘plotting a war on middle Britain’ at a press conference at the end of the Commonwealth heads of government meeting (Chogm) in Samoa today.
‘No. Let me clear about that,’ he said. What we’re doing is two things in the Budget.
‘The first is fixing the foundations, which is dealing with the inheritance that we’ve got, including the £22billion black hole. We have to deal with that.
‘In the past leaders have walked past those problems, created fictions, and I’m not prepared to do that.’
Asked whether he had misled the public in the Labour manifesto, the Prime Minister responded: ‘No, we were very clear about the tax rises that we would necessarily have to make, whatever the circumstances, and you’ve listed them there, and I listed them, I don’t know how many times in the campaign.
‘We were equally clear in the manifesto and in the campaign that we wouldn’t be increasing taxes on working people, and spelt out what we meant by that in terms of income tax, in terms of NICs and in terms of VAT and we intend to keep the promises that we made in our manifesto.’
Labour is separately expected to help the poorest with a change to universal credit, the Guardian revealed today.
More than one million households are expected to be £420 a year better off from the ‘Fair Repayment Rate’ change to be announced next week.
‘It’s a downpayment on poverty reduction. It is unacceptable that people are in this kind of deep poverty, and this is a small victory for people in deep poverty,’ a Whitehall source told the outlet.
The change is expected to come into effect from next April, capping the amount that can be cut from benefit payments each month to repay short-term loans and debts.
The Budget will be delivered on October 30.
