Keir Starmer has all-but confirmed that a key tax rate is set to go up in the Budget - sparking fresh accusations that would breach an election manifesto pledge.
The prime minister refused to deny that chancellor Rachel Reeves is planning to put up the employers’ rate of National Insurance (NICs) in order to raise an estimated £17 billion for the Treasury.
That is despite his party’s manifesto saying: “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.”
On BBC Breakfast this morning, reporter Henry Zeffman asked the PM: “Did your manifesto rule out increasing any rate of National Insurance - employers or employees - or is it merely talking about ruling out increasing the employees’ rate?”
Starmer said: “We were very clear in the manifesto that we wouldn’t be increasing tax on working people. We expressly said that that was income tax, that was NICs etc. So we set that out in the manifesto.”
Zeffman then asked: “But NICs just for employees?”
The PM replied: “It was very clear from the manifesto that what we were saying was we’re not going to raise tax for working people. And it wasn’t just the manifesto, we said it repeatedly in the campaign, and we intend to keep the promises that we made in our manifesto.
“So I’m not going to reveal to you the details of the Budget, you know that that’s not possible at this stage. What I will say is where we made promises in our manifesto, we’ll be keeping those promises.
“This is a Budget that is going to be tough, of course, but the focus will be on rebuilding our country and ensuring that we get the growth we need in our economy.”
Laura Trott, shadow chief secretary to the Treasury, said: “In 2021, the 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.
“Rachel Reeves herself previously called the move anti-business and we agree, it is a tax on work that will deter investment, employment and growth, and the Office for Budget Responsibility says it will lower wages.
“Only a day after their first investment summit, the prime minister and chancellor are choosing to sow further uncertainty and chaos for businesses by opening the door to a new jobs tax.”
The Liberal Democrats’ deputy leader and treasury spokesperson, Daisy Cooper, said: “The chancellor needs to think again if the government is considering hiking taxes on small businesses, who have already suffered from eye-watering tax rises under the last Conservative government.”
She said the Budget should put the burden on “big banks, social media giants and oil and gas firms” instead.
Cooper added: “The Conservative government has left our economy on life support. Now is the time to boost growth by backing small businesses and repairing our crumbling public services.”
Paul Johnson, director of the highly-respected Institute for Fiscal Studies, has insisted that would be a “straightforward breach” of Labour’s manifesto.
Reacting to Starmer’s comments, Johnson pointed out on X: “Manifesto says ‘no increases in NI’.”
However, he also said that going ahead with the NI increase would be a better way of raising £17bn than a “complex array of other taxes”.