Keir Starmer has denied misleading the public over tax rises during the election campaign, amid reports the government is planning to increase employers’ national insurance contributions.
Asked if he had misled voters by not warning them about the billions in tax rises expected in the government’s first budget on Wednesday, the prime minister said: “No, we were very clear about the tax rises that we would necessarily have to make whatever the circumstances … I listed them I don’t know how many times in the campaign.
“We were really clear in the manifesto and in the campaign that we wouldn’t be increasing taxes on working people and spelled out what we meant by that in terms of income tax, in terms of NICs and in terms of VAT, and we intend to keep the promises that we made in our manifesto.”
The chancellor, Rachel Reeves, is reportedly set to increase the NI rate for employers by up to two percentage points as she seeks to raise £20bn for public services, including the NHS crisis.
National insurance contributions are the UK’s second-largest revenue stream after income tax. Employers pay at a rate of 13.8% on workers’ earnings above £175 a week. Reeves is also expected to decrease the earnings thresholds at which employers start paying the tax, according to reports.
The combined measures in Labour’s first budget in 15 years are expected to raise nearly £20bn. The government says there is a £40bn funding gap in public finances they claim was inherited from the Conservatives.
A HM Treasury spokesperson said: “We do not comment on speculation around tax changes outside of fiscal events.”
Employers have said that such a move would amount to a tax on jobs, and could hit hiring and limit pay rises, hurting businesses including pubs, hotels and restaurants.Martin McTague, the chair of the Federation of Small Businesses, said he was opposed to the idea.
“What it will do is damage growth, it certainly increases wages,” McTague told BBC’s Today programme, adding that such a change would reduce employment.
A government source told the BBC: “There is a universal consensus that the NHS needs more money … That means asking businesses to help out. The choice is investment versus decline.”
In the buildup to next week’s budget, there has been much discussion of what the Labour party’s manifesto commitment to not raise taxes on “working people”, which appears 21 times in the party’s manifesto, means in practice.
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Starmer has faced backlash after saying that someone who earned income from stocks and shares did not fit his definition of a working person. His spokesperson later clarified that he was referring to people who “primarily get their income from assets”.
The government is expected to raise capital gains tax on the sale of shares and other assets, which is set at up to 20%, by several percentage points.
Asked whether he was declaring war on middle Britain, Starmer said: “No. Let me be clear about that. What we’re doing is two things in the budget. The first is fixing the foundations, which is dealing with the inheritance that we’ve got, including the £22bn black hole. We have to deal with that. In the past 14 years, leaders have walked past these problems, created fictions, and I’m not prepared to do that. We’re going to fix the foundations. And having fixed the foundations, we’re going to rebuild our country.”
He said there was light at the end of the tunnel for the public after the difficult decisions that would be made in the budget. “What I want to be judged on is: one, have we made people better off? Do they feel better off under the Labour government, because we fixed the foundations? And secondly, that we genuinely get the NHS back up on its feet.”