Labour’s 2024 election manifesto pledged not to increase National Insurance, Income Tax, or VAT for working people.
However, a debate has emerged over whether this extends to employers’ National Insurance contributions.
Chancellor Rachel Reeves has warned of a “tough” Budget on October 30, signalling that businesses may face a hike in National Insurance contributions.
She clarified that the manifesto pledge specifically relates to the employee element of National Insurance, not employer contributions.
The government faces a £22 billion “black hole” in its finances, persisting throughout the forecast period. Reeves emphasised the need to pay for day-to-day spending through tax receipts, which is currently not on track.
A potential increase in employers’ National Insurance contributions could generate approximately £16 billion for the Treasury.
Prime Minister Sir Keir Starmer has insisted the government will keep its manifesto promises, stating they wouldn’t increase tax on working people, including income tax and NICs.
Reeves plans to publish a business tax road-map at the Budget, outlining the tax burdens firms will face under the Labour administration.
The government aims to balance a competitive tax system with economic and fiscal stability to attract investment.
The upcoming Budget announcement is expected to provide more concrete details on the government’s fiscal strategy, including any changes to National Insurance rates.
Rachel Reeves, said: “We were really clear in our manifesto that we weren’t going to increase the key taxes paid by working people: income tax, national insurance and VAT and, on the business side of commitment, that we would cap corporation tax at its current rate of 25 per cent which was the lowest in the in the G7 and we will stick to the commitments we made in our manifesto.
“I understand that for every business, stability is the foundation of success. In the next fortnight, I will be finalising my first Budget as Chancellor of the Exchequer and the situation that we have inherited means that we face difficult choices.”
“The first step that we must take to grow our economy is to restore fiscal and economic stability, because balancing the books by ensuring that we do not borrow for day-to-day spending is not anti-investment.
“In fact it is the only way to ensure that both Government and business can invest with confidence.”
As the government grapples with balancing its manifesto commitments and the need to address the significant financial shortfall, all eyes will be on the October 30 Budget for clarity on how Labour plans to navigate these complex economic challenges.
