UK (Parliament Politics Magazine) – Shadow Chancellor Mel Stride warns Rachel Reeves has one month to scrap Labour’s “ticking time bomb” jobs tax before it derails Britain’s economic recovery.
The Shadow Chancellor has sounded the alarm, urging Chancellor Reeves to reverse her jobs tax within a month to prevent an economic downturn.
What did Mel Stride warn about Rachel Reeves’ job tax hike?
As reported by The Telegraph, Mel Stride urged Ms. Reeves to cancel the tax hike, which he claimed would “destroy jobs, slow down economic growth, and push inflation up throughout the year.”
Mr Stride stated,
“This is not just another tax increase. It’s a ticking time bomb that threatens to further decimate jobs, stunt economic growth, and escalate inflation – making an already difficult economic situation far worse.”
He added,
“A 1.2 per cent increase to employers’ National Insurance contributions might not sound a lot, but as an entrepreneur I can tell you it’s a significant sum that will see jobs cut, wages stagnate, investment plans shelved, prices rise and businesses fold.”
The shadow chancellor warned that the funds collected will be “absorbed” by rising government borrowing costs.
Referring to the rising borrowing costs, he said,
“Thanks to the Chancellor’s decision to also ramp up borrowing, the money raised by her Jobs Tax will be swallowed up by higher spending on debt interest – not spent on the public’s priorities but poured down the drain.”
How will the NICs hike impact businesses and jobs?
The planned 1.2% increase in employers’ NICs will add hundreds of thousands of pounds in additional costs, raising fears over higher consumer prices and widespread job losses.
Employers will see their national insurance contribution rate increase to 15%, a rise from 13.8%, adding to business costs.
Businesses will now face a lower tax threshold of £5,000, down from £9,100, placing many low-wage workers under the NICs system for the first time.
What spending cuts is Chancellor Rachel Reeves planning ahead of the Spring Statement?
Rachel Reeves prepares plans to make deep cuts to welfare and government spending worth billions before the upcoming Spring Statement, sources reveal.
She will introduce major revisions to the government’s spending watchdog, amid concerns over her fiscal flexibility following October’s Budget.
Treasury insiders warned that “the world has changed” since Ms. Reeves introduced Labour’s first Budget, where she had a £9.9 billion reserve in her fiscal plans.
The chancellor also warned on Tuesday that the UK could still feel the impact of Donald Trump’s impending trading wars, even if exempt.
What did sources say about the changing economic landscape?
An insider told the press,
“Clearly the world has changed a lot since the autumn Budget. People are watching that change happen before their eyes.”
They continued,
“The Office for Budget Responsibility will reflect that changing world in its forecasts later this month and a changing world will be a core feature of the chancellor’s response later this month.”
What did the IPPR say about Rachel Reeves’ planned cuts?
The Institute for Public Policy Research (IPPR), a left-leaning think tank, has warned that Ms. Reeves’ projected budget cuts could lead to “significant risks.”
The associate director of think tank, Avnee Morjaria stated,
“Some public services are already in crisis, and further cuts could undermine government commitments on health, education, crime and more.”
She added,
“Waiting lists in the NHS are stubbornly high, councils are on the verge of bankruptcy, backlogs in the criminal courts are at record levels and prisons are at bursting point.”
Ms Morjaria said,
“Welfare changes could deliver real savings over time by supporting people into work, but a ‘cuts first’ approach is likely to undermine efforts to reform the system and worsen child poverty just as the government sets out its new child poverty strategy.”
What are employer National Insurance contributions?
National Insurance (NI) is paid by both workers and employers, but the Chancellor’s reforms target only businesses. Unlike employee NI, employer contributions are paid directly by firms to the Government, without deducting from workers’ salaries.
The government is ready to collect £109bn from employer NICs this year, significantly surpassing the £60bn contributed by employees.