LABOUR is considering raising employers’ National Insurance contributions in the forthcoming Budget, it has become clear.
Prime Minister Sir Keir Starmer has indicated that he does not regard the levy as covered by his election commitment not to increase taxes on “working people.”
This was stated as covering income tax, VAT and National Insurance, but it did not specifically mention bosses’ contribution to the latter.
Sticking to his gloomy messaging, Sir Keir said: “This is going to be a Budget that’s going to be tough, of course, but the focus will be on rebuilding our country and ensuring that we get the growth needed in the economy.”
Chancellor Rachel Reeves’s debut Budget on October 30 will have to address the so-called “£22 billion black hole” Labour has located in the public finances, a discovery that has established an almost supernatural grip over political debate.
A rise in employers’ National Insurance would address that within the terms of Sir Keir’s pledge that “those with the broadest shoulders” would bear the cost of plugging the hole.
It would likely not attract the back-bench discontent occasioned by the cutting of winter fuel benefit to most pensioners, who do not have broad shoulders at all.
The Tories were quick to claim that an employers’ National Insurance hike would breach both the terms of Labour’s manifesto and previous commitments made by Ms Reeves.
Laura Trott, shadow chief secretary to the Treasury, said: “In 2021, the [current] Chancellor said increasing employer National Insurance was a tax on ‘workers.’
“That’s why, even in her own words, it breaks Labour’s manifesto promise not to increase tax on working people.”
Businesses warned that any increase would operate as a “tax on jobs.”
Kate Nicholls, chief executive of lobby group UKHospitality, said: “Hospitality businesses are much less able to stomach yet another cost increase.
“But it is hospitality that is most likely to support people from economic inactivity back into the workforce.”
An NI increase will not plug the hole on its own. Resolution Foundation economist Cara Pacitti warned that tax rises were “all but inevitable,” with other options including more spending cuts and manipulating Treasury borrowing rules.
A Labour spokesman said Ms Reeves made her priorities clear, telling the Cabinet that “the scale of inheritance meant there would have to be difficult decisions on spending, welfare, and tax — and that the long-term priority had to be unlocking private-sector investment to drive economic growth.”
