Rachel Reeves is risking a ‘bonfire of jobs’ as she plots massive tax rises, businesses and MPs warn
RACHEL Reeves is risking a “bonfire of jobs” by hitting Britain with one of the biggest tax-hiking Budgets in history, businesses and MPs have warned.
The Chancellor is planning to raise an eye-popping £40 billion in levy rises and painful spending cuts.
Millions are set to pay more in income tax, employer National Insurance Contributions (NICs), inheritance tax and fuel duty in her nightmare Halloween Budget.
Business chiefs, economists and Tory MPs all tore into the plans – warning it will lead to job losses, lower wages and higher prices.
The government’s own fiscal watchdog – the Office for Budget Responsibility – is expected to say the rise in NICs will mean “lower wages and higher prices”.
Tina McKenzie, from the Federation of Small Businesses, said: “Hiking small firms tax is a recipe for cuts to pay, hours and jobs.
“Tax on work should be going down, not up.”
Kate Nicholls, boss of UK Hospitality, said: “Increasing employer NICs would be a gut-punch to thousands of hospitality venues that are already struggling to pay the bills.
“These businesses want to create more jobs for local people but this tax increase will have the opposite effect.”
The Institute for Fiscal Studies think-tank said raising employer NICs is effectively “a tax on the earnings of working people”.
Laura Trott, the shadow Treasury Minister, said of NICs: “There is no two ways about it – this measure will cause a bonfire of jobs right across the country.”
Tory former Chancellor Kwasi Kwarteng said Labour risks entering a “doom loop” by raising taxes and killing growth.
He said: “They have given inflation-busting pay rises to the unions and that is why Rachel is now looking at freezing income tax thresholds.
“We tried to lower taxes, they are putting them up. If they don’t get any growth they will keep raising taxes.
“You will get a doom loop where you are putting up taxes and killing growth. She shouldn’t be putting up taxes. She should be curbing public spending.”
‘Triple whammy’
Planned tax hikes come on top of the government’s decision to increase the power of trade unions and impose more employment law red tape on businesses.
Panicked bosses warn they are being hit by a “triple whammy” of extra costs.
Around 25 per cent of pubs, bars and restaurants are already slashing their opening hours compared to last year, according to a UK Hospitality survey.
The group’s boss Ms Nicholls said “The government is hitting us with a triple whammy which is pushing up costs.
“They want big increases in the national living wage again – that has partly been driven by the big public sector pay agreements they have handed out.
“They have got their employment bill which brings extra costs for businesses.
“And now we are facing tax hikes. Something has got to give.”
Tom Clougherty, executive director of the Institute of Economic Affairs think-tank said: “Tax rises are always going to weigh on the economy and hit household budgets.
“If the books need to be balanced, it would be better to do it through spending cuts – while also reforming the state and public services for the long run.”
A record 632,756 firms are teetering on the brink of collapse, according to research by insolvency specialists Begbies Traynor.
A 1 penny rise in employer national insurance would mean a typical pub with 10 employees paying an extra £2,079 in tax, according to the FSB.
A typical small manufacturer with 50 employees would pay an extra £10,337 a year.
Meanwhile, several Cabinet big beasts – including Angela Rayner – are in revolt after being forced to find painful spending cuts by the Treasury.
Ministers could quit over the “harsh” settlements, government insiders fear.
An ally of Ms Rayner said: “I don’t recognise this depiction of Angela as a Queen Boudica in revolt.”
The Ministry of Justice is said to be unhappy with their settlement – having expected more cash to ease the prisons and courts crisis.
In transport, the popular £2 cap on bus fares could be scrapped because of the squeeze.
Although dollops of cash are being found to extend HS2 to Euston in London.
Other departments are having to delay or scrap schemes to make their sums add up.
A senior Labour party insider: “There has been quite a bit of discontent across the cabinet – especially from departments with unprotected budgets. Things are pretty bad.”
Some departments are really going to suffer
Cabinet minister
A senior party figure on the Budget said: “There are going to be lots and lots of small bad things.”
A Cabinet minister said: “It is going to be a very very tight round.”
Another minister said: “Some departments are really going to suffer.”
Another insider said: “I think ministers could even walk over the spending cuts.”
Ms Reeves is refusing to tell Cabinet ministers what taxes are going up on their patch – sparking anger.
A source said: “They are being kept in the dark. It is all being seen as a big test of Rachel’s personal authority.”
Ms Reeves has accused the Tories of leaving a giant “blackhole” which has left her having to make hugely painful decisions.
Taxes will be ramped up and spending cut to plug the gap and get the country’s coffers in better nick, her allies have said.
Taken a battering
But she will tear up fiscal rules so she can borrow more for big infrastructure projects in a bid to boost growth.
Labour’s poll ratings have taken a battering since their landslide election victory on July 4.
The PM sacked his chief of staff Sue Gray and promoted his right hand man Morgan McSweeney as part of a reset earlier this month.
Mr McSweeney is planning to appoint more people to No10 as he feels the political operation is “underpowered” and they need to get on the front foot.
A spokesman for Ms Reeves said he would not speculate on Budget reports.
It's more broken promises
By Shadow Treasury Minister Laura Trott
IT IS obvious to everyone that Labour have been planning tax rises all along.
And when they failed to be honest with the public about this during the election, we called them out for it loud and clear.
In fact, I held a press conference during the campaign where I outlined the glaring gaps in Labour’s plans and the taxes they might raise to pay for their policies.
I stated then that, if they won, Keir Starmer and Rachel Reeves would falsely claim the public finances they inherited were much worse than they thought, and they would use this to justify imposing tax rises that they hadn’t been honest about with the British people.
Sound familiar?
One of these taxes that we called them out for considering was employer National Insurance contributions.
And what was the Labour Party response? That we were talking about things “Labour isn’t doing”.
Let’s be clear – raising employer NICs is a tax on business, and businesses themselves are already sounding the alarm, with the Institute of Directors saying just this week that such a measure would be like a “poll tax on business”.
But it is also a tax on jobs and a tax on workers.
As the Office For Budget Responsibility has set out, “additional payroll costs for employers are passed through into lower wages”.
The move will make it harder for businesses to reward staff and hire. It will stifle productivity and competitiveness, causing lower employment rates.
These lower employment rates lead to lower growth. There are no two ways about it — this will cause a bonfire of jobs across the country.
‘Fiddle the figures’
When paired with Angela Rayner’s employment laws announced last week, which will increase the regulatory burdens on businesses, I know I am not the only one left wondering how the Labour Party could look in the eyes of the firms they hosted this week at their investment summit and argue they are on their side.
There is, of course, a political argument to be had on whether taxes should rise to fund public services.
But instead of being honest and making this argument, Labour refused to be straight about their plans.
Much has been said in the past about David Cameron and George Osborne’s economic record.
But they set out clearly during the 2010 campaign the problems they had identified and how they were going to fix them.
In contrast, this Labour Government have simply not been truthful.
During the election, they pledged to provide a “secure retirement for pensioners”, but they then cut winter fuel payments for older people on as little as £13,000 a year.
Rachel Reeves promised not to “fiddle the figures”, but they now look set at the Budget to do exactly that.
They promised families that GB Energy would reduce their bills by £300.
But now businesses, experts and even the unions say the plans will make our energy more expensive.
So it is clear that raising employer NICs would be just the latest in a long line of broken promises. Labour thought being in government would be easy.
They thought they could get away with anything. Their arrogance over our mistakes led to them thinking they did not need to develop any policy to run government better.
They were wrong.
Their false piety has been pierced so comprehensively by the Downing Street passes for donors and crony appointments to the civil service.
Their hypocrisy has been laid bare for all to see.
Yet still, they bleat on about the Tories, like some broken spell they try to mutter over and over again, in an attempt to conjure up the old magic.
But it’s not going to work.
At the Budget they will undoubtedly harp on about the now-discredited claims on their inheritance. But let’s lay out the facts.
The Labour Party inherited an economy that had inflation at two per cent and unemployment half what it was in 2010.
And they inherited the fastest- growing economy in the G7.
Labour’s politically driven nonsense has to stop.
Keir Starmer and Rachel Reeves must now face up to their hollow promises and deliberate subterfuge about taxes during the election, and they must begin to make an argument that stands on its own two feet.
Labour are so obsessed with playing political games that they find themselves going into the Budget simultaneously claiming that while Conservatives spent too much, their solution is to spend more.
It’s nonsense, and Sun on Sunday readers won’t be fooled.
Be in no doubt, the Budget on October 30 is the one they have always planned to deliver.
Labour can’t blame the Tories any more.
They are in charge, and they are making a mess of it.
It’s nobody’s fault but their own.