A Cabinet minister has refused to say whether a small business owner earning £13,000 a year is a “hardworking person” who should be protected from tax rises in Rachel Reeves’ first budget.
Bridget Phillipson, the education secretary, said Labour’s definition of a working person was someone “whose main income arises from the fact that they go out to work every day”.
She said this would apply to cabinet ministers like her, who “would not see higher taxes” when they reviewed their pay slips after the budget on Wednesday.
But when asked whether the same protections applied to small business owners who make their income from profits, he declined to make the same assurances, describing the question as “hypothetical.”
“We can go through a variety of “There are different hypotheses about who may or may not be affected by fiscal measures that may or may not occur in the budget,” he told the BBC. Sunday with Laura Kuenssberg program.
Rachel Reeves expected to increase employers’ national insurance contributions
JOSÉ LUIS MAGANA/AP
“I know it’s frustrating that, before the budget, I can talk about some areas, but not all.”
“When Rachel sits here next weekend, you can ask her about the measures she has announced.”
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Reeves is widely expected to increase the rate of employers’ national insurance contributions by between 1 and 2 per cent in next week’s budget, in a move that would hit small business owners particularly hard.
It is also expected to make a “significant” cut to the income threshold at which employers start making money. national insurance contributionswhich is currently set at £9,100.
This, the Labor Party insists, does not breach its manifesto commitment not to increase income tax, VAT or national insurance on “workers”.
But estimates from the Federation of Small Businesses say these changes would increase the cost of hiring a new employee on an average wage of £600 per worker, and by £500 for someone on the national living wage of £11.44. sterling per hour.
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The Treasury plans to protect smaller businesses by increasing their allowances. At the moment, employers with NIC bills of £100,000 or less receive a subsidy on the first £5,000 (the employer equivalent of personal tax relief), roughly the equivalent of paying four people the national living wage. This figure is expected to rise to £6,000, helping around one million small employers at a cost of £1 billion.
Former Bank of England governor Mervyn King warned that any increase in employers’ national insurance would ultimately be borne by individuals and said the debate over not raising taxes on workers was a “terrible wishful thinking”.
“Taxes are paid by people, not businesses or institutions; they ultimately fall on the amount people can spend, and significant amounts of money can only be raised by raising taxes on most people, however be defined.” that, but most people will have to pay higher taxes,” he said Sunday Morning with Trevor Phillips in Sky News.
“And if they, instead of undoing cuts to employees’ national insurance contributions, increase employers’ national insurance contributions, that will make it less likely that companies will agree to wage demands, they will press on that, They will probably be less enthusiastic about creating new jobs.
“Ultimately, the impact of these higher taxes has to fall on the consumption of the majority of people, no matter how that group is defined.”
King said the government had been “very reckless to commit to its promise not to increase employees’ national insurance, VAT and income tax during the election”.
“I believe the previous government was irresponsible in cutting national insurance contributions when that was only remotely feasible, given unrealistic public spending projections.
“And I think the opposition didn’t need to commit to not reversing that. And honestly, I think it would be much better now to tell people: this is where we are, to be completely honest with people and say, ‘Yes, we made that promise in the heat of an electoral battle, it was a mistake. “We’re sorry and we’re going to fix it.”
“We are going to return national insurance contributions to where they were, because without that, we won’t have the money to support the NHS and other public services.”