We are now just three weeks away from Labour’s first Budget and the mood music out of the Treasury is all rather ominous. On 30 October we find out the answer to the great question of British politics: can Rachel Reeves square her spending plans with her past promises on tax? With Labour desperate to keep investors onside ahead of their big jamboree tomorrow, it was up to Jonathan Reynolds to hold the line on Sky this morning.
Unfortunately for the Business Secretary, it seems he made the cardinal sin of ‘committing news.’ Asked whether the government would increase National Insurance for employers, Reynolds refused to rule it out. Labour promised in its manifesto that it would not raise taxes on working people, but Reynolds has said the pledge only applied to employees. He also refused to confirm whether the upcoming Budget would apply the tax raise to employers.
Grilled on whether Labour’s promise applied to both employees and employers, he told Sky’s Trevor Phillips: ‘That pledge, it was taxes on working people, so it was specifically in the manifesto, a reference to employees and to income tax.’ He continued: ‘There’s a lot already in the manifesto, but you have to wait for the detail of a Budget.’ For reference, here’s what the Labour manifesto promised back in June:
The Conservatives have raised the tax burden to a 70-year high. We will ensure taxes on working people are kept as low as possible. 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.
‘We will not increase National Insurance’ seems pretty comprehensive to Steerpike. Government apparatchik are now insisting that raising employers’ NICs would not break their manifesto pledge – a strong indication that, er, yes, they are looking at doing this in the budget. Yet as Labour member and tax lawyer Dan Neidle argues:
Problem is: an increase in employer national insurance *is* a tax increase on working people. It would break Labour’s pledge. Why? Because, in the long run, the economic cost of employer national insurance is born by employees.
Boris Johnson broke the 2019 Tory pledge not to increase National Insurance in 2022. Is Reeves about to repeat his mistake – only in double quick time too?
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