Sir Keir Starmer has not ruled out a National Insurance increase for employers in the Budget, in a BBC Breakfast interview.
The prime minister side-stepped questions over whether Labour’s manifesto promise not to raise taxes for “working people” covered employers’ National Insurance (NI), but it was apparent from the prime minister’s interview that NI for employers is going to rise.
The Labour Party’s 2024 manifesto ruled out raising National Insurance, income tax and VAT.
Speaking in Downing Street, Sir Keir said this month’s Budget was “going to be tough” but would “focus on rebuilding our country”.
Sir Keir said Labour had been “very clear in the manifesto that we wouldn’t be increasing tax on working people”.
He added: “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.”
On Monday, Rachel Reeves said Labour’s election pledge not to increase NI on “working people” related to the employee element, as opposed to the sum paid by employers.
Treasury officials are reportedly exploring national insurance on employer pension contributions to raise budget revenue.
Introducing national insurance at the full 13.8% rate on employer pension contributions could raise as much as £17bn a year for the exchequer according to the Institute for Fiscal Studies (IFS).
Employers currently pay NI at a rate of 13.8% on all employees’ earnings above £175 per week.
NI rates also apply to employees, who start paying when they turn 16 and earn more than £242 a week, or have profits of more than £12,570 a year.
It is not paid by people over the state pension age, even if they are working.
The BBC understands some business groups have been steered away from expecting an increase in the headline rate of national insurance for employers.
The prime minister is adamant that he will not be drawn on Budget speculation in advance of the formal announcement in just over a fortnight.
That is the standard position that governments adopt given these are market-moving measures – and in this particular case the Budget will be the biggest political and economic moment for this government so far.
That being said, it was pretty clear from the prime minister’s interview that National Insurance for employers is going to rise.
In communication terms, Downing Street knows that a hare is running – they have the option of ruling increasing employer NI out, and by not doing so, they know that people will assume it is going to happen.
A similar dance has taken place on the possibility of Reeves altering the fiscal rules – the government’s own rules about how much money it can borrow and in what circumstances.
There will be a row about whether this is consistent with Labour’s manifesto or not. Either side of that argument has a reasonable case, and so there is a question for the government about trust.
But the more important question is what a national insurance increase for employers would mean for the economy, especially at the same time as the government is trying to make the UK a better environment for business investment.Labour’s manifesto
Laura Trott, Conservative shadow chief secretary to the Treasury, accused Reeves of “breaking Labour’s manifesto promise not to increase tax on working people”.
She said it would be a “tax on work that will deter investment, employment and growth”.
The Office for Budget Responsibility’s (OBR) research indicates that increasing employer national insurance could hike hiring costs, which may lead to slower jobs growth or stagnant wages.
Daisy Cooper, the Lib Dem’s Treasury spokesperson, said: “The burden of this Budget should fall on the likes of big banks, social media giants and oil and gas firms, instead of our local community businesses.”
And Paul Johnson, from the IFS, told Times Radio: “It seems to me that would be a straightforward breach of a manifesto commitment… it says very clearly we will not raise rates of national insurance.”
