London (Parliament Politics Magzine) – Labour’s tax increase will not strike workers’ payslips, the UK education secretary has pledged.
Bridget Phillipson expressed that the tax rises being prepared by Rachel Reeves would not impact employees’ take-home pay, as ministers struggle to define what was meant by their manifesto promise not to increase taxes on “working people”. The chancellor is anticipated to announce an addition to employers’ national insurance contributions in a move that could increase between £8.5bn and £20bn.
What tax changes could labour introduce for employers?
Phillipson stated:
What we set out in our manifesto was that we would not increase VAT, national insurance or income tax on working people. And coming out of this budget, working people will not see higher taxes in the payslips that they receive. That is important because we know the pressures that people are under.
How will Chancellor Reeves address labour’s tax pledges?
Chancellor Reeves will deliver the first Labour budget in 15 years, which is possibly to include about £40bn worth of tax increases and spending cuts, coupled with modifications to the government’s debt rules to permit her to spend billions more on infrastructure in the long term.
The chancellor said her budget would be as significant as any in the party’s history, stating:
In 1945, we rebuilt after the war; in 1964, we rebuilt with the ‘white heat of technology’; and in 1997, we rebuilt our public services. We need to do all of that now.
Which taxes are expected to increase under labour’s plan?
The most effective tax increase is likely to be a 1p or 2p peak in national insurance contributions, along with a decrease in the threshold at which companies start paying those contributions. The chancellor is also preparing to raise VAT on school fees, to raise inheritance tax on land and to increase capital gains tax on money made from selling shares. The series of deliberate tax rises has led to a row over whether Labour is about to violate the promises it set out before the election.
In its manifesto, the party vowed:
“Labour will not increase taxes on working people, which is why we will not increase national insurance, the basic, higher, or additional rates of income tax, or VAT.”