MILLIONS of workers are braced for a pay squeeze after Rachel Reeves launched a tax raid on firms.
The Chancellor insisted her Budget would protect the nation’s employees as per Labour’s manifesto.
Rachel Reeves delivered her first Budget today[/caption]
But top economists warned her National Insurance hike on bosses would ultimately be felt by their staff in reduced wage rises.
The Institute for Fiscal studies said: “Somebody will pay for the higher taxes – largely working people.”
Today Ms Reeves said she was raising the headline employer rate of National Insurance from 13.8 to 15 per cent.
To groans from Opposition MPs, she also announced a reduction to the threshold business start paying NICs from £9,100 to £5,000.
It will raise £25billion – the equivalent of around £800 per employee for each firm.
The “trick and treat” Halloween package included:
- A freeze to fuel duty for a 15th consecutive year in a win for The Sun’s Keep It Down campaign
- A penny off a pint by cutting draught beer duty, but raising booze taxes on other drinks
- A gloomy forecast of sluggish growth in a blow to Labour’s flagship mission
- A stamp duty rise for second-home buyers of two percentage points
- A pay rise for millions as the minimum wage was increased by £1,400 a year
- A hike to a packet of cigarettes as smoking duties were raised
- A new tax on vapes ahead of the looming ban on disposable e-cigs
- Higher taxes on air passenger duty for private jets that hits the wealthy
- A benefits crackdown with Ms Reeves telling jobless Brits to “get back to work”
- An increase to the state pension of £473 next year through the triple lock
- An inheritance tax raid through freezing the rates people pay
- An increase to the Carer’s Allowance to give cash to 60,000 more carers
For weeks Labour has insisted this would not break a flagship election pledge not to raise the rates of income tax, National Insurance and VAT on working people.
Ms Reeves insisted to MPs: “Working people will not see higher taxes in their payslips as a result of the choices I make today. That is a promise made – and a promise fulfilled.”
But Paul Johnson, director of the IFS, said working people will still pay the price.
He said: “The OBR suggests that three quarters of the impact of employer NICs will be felt by employees, even if the changes don’t show up on payslips.
“Indeed, these tax rises partly explain why the OBR has downgraded its projections for real household income growth over the next few years.
“Somebody will pay for the higher taxes – largely working people.
“The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed.”
Announcing the NICs sting on bosses, Ms Reeves said: “I know that this is a difficult choice. I do not take this decision lightly.”
Defiant Ms Reeves said: “We are asking business to contribute more and I know that there will be impacts of this measure felt beyond businesses, too as the OBR have set out today.
“But in the circumstances that I have inherited, it is the right choice to make. Successful businesses depend on successful schools.
“Healthy businesses depend on a healthy NHS. And a strong economy depends on strong public finances.
“If the party opposite chooses to oppose this choice, then they are choosing more austerity, more chaos and more instability. That is the choice our country faces too.”
The Halloween package included a raft of treats – including a cut to pub beer prices, and hikes in the minimum wage and state pension.
But it also clobbers millions with tricky tax hikes that Ms Reeves said would fund a spending spree on services like the NHS.
