Rachel Reeves suggests UK businesses could ‘absorb’ national insurance increases

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Rachel Reeves has suggested UK businesses could “absorb” her increase to employers’ national insurance contributions by accepting reduced profits or creating efficiencies, instead because it passes lower wages onto workers.

The Prime Minister on Sunday defended his first Budget, insisting that when Labour’s big package of tax increases, spending and debt was delivered within, it was “good for job growth and money growth”. wage”.

Reeves told Sky News Sunday morning with Trevor Phillips that businesses face a “choice” over her decision to raise £25bn through NIC increases for employers.

“Businesses will now have to make a choice, whether they will absorb that through efficiency and increased productivity, whether it will be through lower profits or perhaps through wage growth,” she said. lower”.

From April, employer NIC rates will increase by 1.2 percentage points to 15%, while the income threshold at which employers start contributing will decrease from £9,100 to £5,000.

The changes have sparked backlash from businesses, charity organization and GPs, and warned that the new measures pose risks lose your job low-paid employees in labor-intensive sectors of the economy.

Reeves has protected the public sector from the impact of NIC increases by allocating funding in his Budget to cover the cost of tax increases.

Wednesday’s budget, Labour’s first since 2010, includes £40 billion in tax increases, largely for business and the rich, to fund increased day-to-day spending and 28 billions of pounds of additional borrowing every year to fund investment.

The measures have pushed up the cost of British government debt, but by late Friday, the gilt market had steady.

Reeves on Sunday said the UK could manage the costs of servicing its national debt, despite interest rates currently running at up to 100 billion pounds a year.

The Prime Minister added that she is “confident” in the ability of the British economy to withstand shocks such as the Covid-19 pandemic or skyrocketing energy prices.

Reeves admitted she was “wrong” to say ahead of July’s UK general election that she would not have to raise taxes, but reiterated her claim that the previous Conservative government had hidden a “loss” “black” in the country’s finances.

She said the Budget marked Labor as wiping out the “mismanagement” of the economy by the Tory government and added: “It belongs to us now.”

Some analysts, including the Institute for Fiscal Studies, have warned that the government will likely need to raise billions of pounds more after this parliament to avoid real cuts to some public services .

But Reeves said: “We’ve got everything out in the open, we’ve put a spending cap on this parliament, we don’t need to go back for more, we’ve got it done now.”

The prime minister’s move on the NIC has sparked accusations that Labor has broken its “three taxes” election promise, but Reeves insisted that her party’s tax commitment was clearly enshrined in its manifesto. this party.

The oath says income tax, VAT and NICs will not increase for “employees” – a suggestion that it applies to employee NICs and not employer contributions.

Asked whether the warning suggested increases to employers’ NICs were premeditated, she emphasized three times that Labor had not planned – or even discussed – the proposals – to raise it before the election.

“This was not something that was on the agenda before the election,” Reeves told the BBC. Sunday with Laura Kuenssberg programme.

Later in the same program, Kemi Badenoch, the Conservative Party’s newly elected opposition leader, said the NIC’s rise was “incoherent”, but did not specify whether her party would reverse it or not.

She was more explicit when she announced that the Conservatives would scrap Labour’s VAT on private school fees if they came to power.