As the UK eagerly awaits the unveiling of Labour’s first budget in 15 years, Education Secretary Bridget Phillipson has sought to allay concerns over the impact of anticipated tax hikes on workers’ paychecks. Speaking on BBC One’s Sunday with Laura Kuenssberg, Phillipson emphasized that despite the government’s plans to raise taxes, employees will not see a reduction in their take-home pay.
The assurances come as Chancellor Rachel Reeves prepares to announce a series of significant tax increases and spending cuts in what is being touted as one of the most momentous budgets in recent history. Sources close to the Treasury suggest that the chancellor is considering a 1p or 2p rise in national insurance contributions, along with a reduction in the threshold at which companies begin paying those contributions. The move could raise between £8.5bn and £20bn, helping to fill the gaping hole in the nation’s finances.
Navigating the Manifesto Minefield
The proposed tax rises have sparked a heated debate over whether Labour is about to renege on its pre-election promises. In its manifesto, the party pledged not to increase taxes on “working people,” specifically ruling out hikes to national insurance, income tax, or VAT. However, the definition of “working people” has become a point of contention, with Prime Minister Keir Starmer attempting to clarify that the term refers to those who earn money through work rather than from assets such as shares or property.
Phillipson sought to quell the controversy, stating: “What we set out in our manifesto was that we would not increase VAT, national insurance or income tax on working people. And coming out of this budget, working people will not see higher taxes in the payslips that they receive. That is really important, because we know the pressures that people are under.”
The Devil in the Details
While the government maintains that raising employers’ national insurance contributions does not constitute a tax on working people, critics argue that the increased costs will ultimately be passed on to employees in the form of lower wages or fewer job opportunities. Shadow Technology Secretary Andrew Griffith accused the government of breaking its promises, telling the BBC: “You’re about to see a government come to office on the promise of no increase in taxation, no increase in borrowing – they’re about to break all of those promises.”
A Budget for the Ages
Chancellor Rachel Reeves has described her upcoming budget as a defining moment for the Labour Party, comparing it to the post-war rebuilding efforts of 1945, the technological revolution of 1964, and the public service investments of 1997. In addition to the controversial tax increases, Reeves is expected to announce changes to the government’s debt rules, allowing for billions more in infrastructure spending over the long term.
“In 1945, we rebuilt after the war; in 1964, we rebuilt with the ‘white heat of technology’; and in 1997, we rebuilt our public services. We need to do all of that now.”
– Rachel Reeves, Chancellor of the Exchequer
Other anticipated measures include raising VAT on school fees, increasing inheritance tax on land, and hiking capital gains tax on money made from selling shares. The sweeping changes have sparked concern among some Labour stalwarts, with former cabinet minister Peter Mandelson calling for universities to be reimbursed for the tax rise in the same way as other public sector organizations.
A Tightrope Act
As the nation holds its breath for the unveiling of Labour’s budget, the government faces the daunting task of balancing the need for increased revenue with the promises made to the electorate. The success of Reeves’ budget will hinge on her ability to navigate this tightrope, delivering the necessary funds to rebuild the country while avoiding the perception of betraying the trust of the “working people” who put Labour in power.
Only time will tell if the chancellor’s gambit will pay off, but one thing is certain: the reverberations of this budget will be felt for years to come, and its legacy will help define the Labour Party’s place in British political history.
