Workers to be hit in the pocket with employers passing on £25bn National Insurance tax raid
MILLIONS of workers are braced for a pay squeeze after Rachel Reeves launched a tax raid on firms.
The Chancellor insisted her Budget would protect the nation’s employees as per Labour’s manifesto.
But top economists warned her National Insurance hike on bosses would ultimately be felt by their staff in reduced wage rises.
The Institute for Fiscal studies said: “Somebody will pay for the higher taxes – largely working people.”
Today Ms Reeves said she was raising the headline employer rate of National Insurance from 13.8 to 15 per cent.
To groans from Opposition MPs, she also announced a reduction to the threshold business start paying NICs from £9,100 to £5,000.
It will raise £25billion – the equivalent of around £800 per employee for each firm.
The “trick and treat” Halloween package included:
- A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer’s Allowance to give cash to 60,000 more carers
For weeks Labour has insisted this would not break a flagship election pledge not to raise the rates of income tax, National Insurance and VAT on working people.
Ms Reeves insisted to MPs: “Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.”
But Paul Johnson, director of the IFS, said working people will still pay the price.
He said: “The OBR suggests that three quarters of the impact of employer NICs will be felt by employees, even if the changes don’t show up on payslips.
“Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years.
“Somebody will pay for the higher taxes – largely working people.
“The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed.”
Announcing the NICs sting on bosses, Ms Reeves said: “I know that this is a difficult choice. I do not take this decision lightly.”
Defiant Ms Reeves said: “We are asking business to contribute more and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today.
“But in the circumstances that I have inherited, it is the right choice to make. Successful businesses depend on successful schools.
“Healthy businesses depend on a healthy NHS. And a strong economy depends on strong public finances.
“If the party opposite chooses to oppose this choice, then they are choosing more austerity, more chaos and more instability. That is the choice our country faces too.”
The Halloween package included a raft of treats – including a cut to pub beer prices, and hikes in the minimum wage and state pension.
But it also clobbers millions with tricky tax hikes that Ms Reeves said would fund a spending spree on services like the NHS.
A few nuggets to give Brits hope, but make no mistake - it's a long road before things get better
By Ryan Sabey, Deputy Political Editor
RACHEL Reeves has used her first Budget to embark on a massive £40 billion tax raid – with only small relief for hard-working Brits.
The Chancellor told the country that there would be short-term pain before any gain at the start of a ten-year plan for Britain.
Treasury sources has been saying there would be no rabbits out of the hat – but there was one for workers.
But there will be a wait.
Income tax thresholds will go up with inflation from 2029 leaving more money in the pockets of people going out to work.
There will be major relief to motorists too who will see fuel duty frozen for yet another year – thanks to The Sun’s Keep It Down campaign
Yes, change won’t happen overnight if anyone was expecting to actually feel better off soon.
And with growth forecast to be less than 2 per cent for the next few years there could be more tax raids and savings on the way.
This Labour government had put growth at the very heart of its plans for office.
But the biggest hit will come to business. Some £25 billion a year by the end of the decade will come from a rise to employer national insurance contributions.
But to help small business there will be exemptions for those firms who employ four or fewer workers.
Despite some concern in the hospitality industry, there will be in part relief as she confirmed “a penny off a pint in the pub”. Some will say that is small beer.
There was a pledge to make waiting lists in hospitals to be no longer than 18 weeks as she ploughed £22 billion into the NHS for day-to-day spending.
She stood in the Commons – as the first female Chancellor to deliver a Budget – telling the country to face the reality in her attempts to rebuild Britain.
She was quick to aim fire at the Tories saying they “failed our country” by breaking the NHS and hurting business with the Brexit deal.
But the Tories will attempt to make hay from Labour putting up taxes.
A tweet from Rishi Sunak was gaining traction in the build-up to the Budget.
Just days before the election, he wrote: “Keir Starmer will put up your taxes. Bookmark this tweet.”
Some departments including Justice and Transport are understood to have been hit hard.
We will only find out the true cost to them in the coming weeks and months.
But some of the cash will be found in 2 per cent efficiency savings across government with greater use of technology and joined-up thinking.
Massive savings of £4.3 billion in counter-fraud measures in welfare will also boost treasury coffers.
If anyone was expecting a rabbit out of the hat to soothe the tax-raising pain, they were probably left disappointed.
Treasury sources have been saying that the era of rabbits out the hat “is over”.
Her ambition is growth to make everyone feel richer but it’s going to be a long road.