HIKING National Insurance for bosses WOULD break Labour’s manifesto, a top economist has warned.
Paul Johnson – the head of the Institute for Fiscal Studies – branded any increase on the rate for employers a “straightforward breach” of the party’s election promise.
Chancellor Rachel Reeves has not ruled out raising the tax at this month’s Budget as a way of plugging what she claims is a £22billion “black hole”.
It has sparked uproar given Labour’s cast-iron campaign pledge not to raise the rates of National Insurance, Income Tax or VAT.
Ministers are now trying to claim this only ever applied to the employee rate of NICs, rather than the tax levied on employers – despite not clarifying this in the manifesto.
But Mr Johnson told Times Radio: “It seems to me that would be a straightforward breach of a manifesto commitment.
“I went back and read the manifesto and it says very clearly ‘we will not raise rates of national insurance’. It doesn’t specify employee national insurance.”
However the economist said that if Ms Reeves does want to raise large amounts of money “then she almost certainly will have to breach that manifesto one way or another.”
The Chancellor is scrambling to fund Labour’s manifesto promises while sticking to the vow there will be “no return to austerity”.
In a bid to make the sums add up, the October 30 Budget is expected to include big tax raids, including on capital gains.
Shadow Welfare Secretary Mel Stride said a hike on employer NICs would “damage growth and break a key manifesto commitment.”
He added: “They cannot credibly argue that their clear pledge not to raise National Insurance excludes Employer’s NI.”
HARRY COLE: Labour’s verbal gymnastic on National Insurance will not wash with many
By HARRY COLE, Political Editor
WITH the exquisite timing we have come to expect from this new government, Rachel Reeves’ big moment falls the day before Halloween — and the mood music coming from the Treasury so far suggests it’s going to be plenty of trick and not much treat.
Which takes us to page 21 of the Labour Manifesto from June: “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.”
But if you squint, can you see some wriggle room there on hiking National Insurance on employers’ contributions?
Business Secretary Jonathan Reynolds certainly thinks so, telling broadcasters yesterday: “That pledge, it was taxes on working people, so it was specifically in the manifesto, a reference to employees and to income tax.”
Which I don’t remember Labour saying at the time.
It’s pretty clear that Reeves is preparing to hike employer contributions, and it’s pretty clear the Tories will hammer that as a straight-up manifesto breach.
And besides, National Insurance is literally a tax on jobs, whether you are pinching it directly from a worker’s pay packet, or making the cost of employing them higher for firms.
And the verbal gymnastics do not stop there.
By any definition, “working people” are clearly people in work, paying their taxes.
READ HARRY’S FULL COLUMN HERE
