Does Labour regret its decision to redefine the meaning of a ‘working person’? The original understanding of the term seemed to be working just fine, until ministers decided to make it the metric for who would and would not be subject to tax rises. Now the party finds itself in the strangest of situations: having to talk down British entrepreneurs and employers, all for the sake of muddling through a painful Budget next week.
It was just a few weeks ago that Labour was hosting its highly anticipated investment summit, trying to attract new business, and funding, to the UK. When former Google CEO Eric Schmidt told the Prime Minister he was ‘shocked’ that Labour wanted to opt for supply-side reforms and go for growth, Starmer decided to add to his dismay, noting that ‘wealth creation is the number one mission of a Labour government’.
The phrase ‘working people’ has only drawn more attention to who is about to see their tax burden rise
It’s not the first time Starmer has spoken about the importance of ‘wealth creation’ under his leadership then. Why, then, insist that the people who do this for the UK – who create jobs and opportunities and value and wealth – aren’t ‘working people’? What kind of a message does it send, not just to British investors, but investors around the world, that the more you build, the less you’re seen to be ‘working’?
Part of the problem with redefining ‘working people’ is that it risks leaving out certain workers that factions of the party inherently dislike. The aversion to landlords, for example, runs deeper the further left you go in the party. Still, it’s difficult to claim that the UK’s trillion-pound rental sector – and almost three million landlords – doesn’t have within it some ‘working people’, such those who fix up apartments and expand supply in a market that desperately needs more homes.
Labour seems to be tying the definition to levels of success: the better one does in work, the less they qualify for ‘working person’ status. This week the PM ruled out of his definition of ‘working people’ those who would use their earnings to invest in stocks and property – a claim that was then revised to include people with ‘small’ asset portfolios. The definition was then expanded through a No.10 spokesperson to include ‘those who have to rely on their pay packets and do not always have the means to write a cheque’, raising further questions about whether people with set-aside emergency funds really don’t count in the ‘working people’ category either.
There was a much clearer way for the party to set out its principle for tax hikes – one that didn’t include trying to insist that people who contribute to vital areas of the economy aren’t ‘working people’. Instead, Labour could have simply named who they want to protect from a higher tax burden: mainly people at the lower end of the income spectrum.
This would have been a simple and understandable position. It’s also not going to happen. The Chancellor has acknowledged that only the ‘key’ taxes for working people – income tax, employee National Insurance and VAT – won’t rise. Other taxes will – and (as the absurdity of the ‘working person’ debate has shown) this will affect plenty of average-salaried workers, too.
It is still not even clear if those ‘key’ taxes will really be protected. If Labour opts to increase employer NI, the costs will inevitably come out of workers’ pay packets. Meanwhile any further freeze on income tax thresholds – an extension Rachel Reeves is expected to greenlight to help find an additional £40 billion – is effectively an income tax rise for millions of workers, who will get pulled into paying higher rates of tax.
In truth, there is no good tactic for covering up tax increases – and the phrase ‘working people’ has only drawn more attention to who is about to see their tax burden rise. Drastically narrowing the definition of a ‘working person’ has simply highlighted just how many people are going to be subject to some of the changes in next week’s Budget.
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