(Bloomberg) -- A UK cabinet minister added to speculation that the government is planning to increase payroll taxes for businesses by raising their national insurance contributions.
In an interview with Sky News, Business and Trade Secretary Jonathan Reynolds insisted the Labour government’s manifesto had only promised not to hike the contributions for employees. National insurance is a payroll tax paid by both workers and firms.
“You knew that pledge was taxes on working people. It was specifically in the manifesto, a reference to employees,” Reynolds said when asked about the election campaign pledge on NICs.
A person familiar with Labour’s budget plans defended the idea of raising employers’ national insurance contributions, telling Bloomberg it would not be a manifesto breach and signaling it is under consideration by Chancellor of the Exchequer Rachel Reeves.
Last week, Prime Minister Keir Starmer left open the prospect of a payroll tax hike for businesses at the upcoming UK budget, as the government seeks ways to plug a £22 billion ($28.8 billion) hole it says it inherited in the public finances. In response to a question about NI payments by businesses, Starmer said the Labour manifesto referred to “not raising tax on working people.”
One option for the government would be to charge national insurance on pension contributions by employers, a move that could raise around £16 billion per year, according to a report by LCP, a consultancy that advises on pensions, investment and insurance.
The Conservative party have argued that any hike in payroll taxes for businesses would be a manifesto breach. Shadow work and pensions secretary Mel Stride told Sky News on Sunday that it would be “absurdity” for Labour to argue that such a move is not a breach of their promises.
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