Keir Starmer has given his strongest signal yet that the Government could hike national insurance for employers in the Budget.
The Prime Minister insisted the Labour manifesto promised not to raise taxes on "working people" but dodged questions on whether that extends to employers national insurance contributions (NICs). It comes after days of persistent rumours that the Government is preparing for tax rises ahead of the Budget on October 30.
Pressed on whether the vow applied to employers, Mr Starmer told BBC Breakfast: "We were very clear in the manifesto that we wouldn't be increasing tax on working people and we expressly said that that was income tax, that was NICs etc. So we set that out in the manifesto."
Asked again whether it was just employees, he said: "We were very clear in the manifesto that what we were saying is that we're not going to raise taxes for working people. 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 will be keeping those promises."
Chancellor Rachel Reeves told Cabinet there will be "difficult decisions on spending, welfare, and tax" to come to fix the £22billion black hole left behind by the Tories. She told the PM’s top team that “the Government could not turn around 14 years of decline in one year or one Budget”, a spokesman said.
But Ms Reeves said the Budget would deliver on the government’s priorities to “protect working people, fix the NHS, and rebuild Britain”.
National insurance is paid by both workers and employers - on earned income, rather than cash from dividends from shares, rental income or interest from savings. Employers pay NICs for most workers earning above £9,100-a-year - paying out 13.8% on earnings above that threshold.
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A one percentage point increase in the Class 1 rate could raise £8.45billion over the 2025/2026, and a two percentage point hike could raise £16.9billion, according to data compiled by HMRC and EY. There has also been speculation the Chancellor could slap the tax on employer pension contributions, which could raise around £17 billion per year if taxed at the same rate.
But businesses warned the move would mean a "tax on jobs". Kate Nicholls, chief executive of industry body UKHospitality, said: "An increase would particularly hammer sectors like hospitality, where staffing costs are the biggest business expense.
"Hospitality businesses are much less able to stomach yet another cost increase, when they're already managing increases in other areas like wages, food, drink and energy. But it is hospitality that is most likely to support people from economic inactivity back into the workforce."
Lib Dem Treasury spokeswoman Daisy Cooper 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.
"The Chancellor should be protecting these smaller businesses, who are the backbone of our economy and the heartbeat of our communities. Now is not the time to raise national insurance rates on our high streets, local businesses and dynamic entrepreneurs."