Raising employer NI ‘not consistent’ with Labour manifesto and could lead to ‘fewer jobs’
Hiking employer national insurance (NI) “doesn’t look consistent” with Labour’s manifesto and could lead to job losses in the long term, the head of an influential thinktank said.
Paul Johnson, director of the Institute for Fiscal Studies (IFS), told Sky News’ Politics Hub With Sophy Ridge that employer NI ultimately “comes from the pay of the employee” and increasing it could result in “less pay rises” and “possibly fewer jobs”.
Politics latest: Downing Street won’t deny PM met Taylor Swift
Sir Keir Starmer has refused to rule out raising national insurance for employers in the upcoming autumn budget.
Some have suggested this would break a 2024 manifesto pledge which said Labour will not increase national insurance, income tax or VAT.
The prime minister claimed on Tuesday that it was clear this meant not “increasing tax on working people” – leaving the door open for the employer element of NI to go up.
Paul Johnson of the IFS
But Mr Johnson said: “I think if we got a straightforward increase in the rate of employer national insurance, that certainly doesn’t look consistent with a very clear statement in the Labour manifesto: ‘We will not raise national insurance contributions’.
“It does not specify employee national insurance contributions.”
Companies pay NI at a rate of 13.8% on all employees’ earnings above £175 per week, but pension contributions made by employers are currently exempt from the levy. This is what experts suggest could be targeted.
Separately, employees and the self-employed pay NI on their earnings, which comes off their payslip.
Ministers have insisted this element will not go up when Chancellor Rachel Reeves delivers her budget later this month, in which she will lay out measures to fill a £22bn “black hole” in the nation’s finances.
👉 Tap here to follow Politics at Jack and Sam’s wherever you get your podcasts 👈
However, Mr Johnson suggested that the impact of any increase to employer NI would ultimately fall on the worker.
“The sort of economic theory tells you that’s what’s likely to happen and the empirical evidence is that that’s what does happen, that if you increase that in the longer term, it results in less in the way of pay rises,” he said.
He added: “In the end, all taxes are paid by people.
“They have to be either paid by the shareholders of the firms that are paying it or the customers or the employees.
“Most of the theory and the evidence suggests that most of the increase will be felt by employees in lower wages, probably, but possibly in the longer term, fewer jobs than there otherwise would have been. I mean, this is very, very similar in the long term to an increase in employee national insurance contributions.”
‘Jobs tax bad for the economy’
Mr Johnson’s view was shared by Craig Beaumont, the executive director of the Federation of Small Business.
He called employer NI a “jobs tax” and said if anything it should be reduced rather than raised.
“If you increase it you would see fewer jobs,” he told Sky News.
“The small business looking at that will go well, what do I do now?
“Do I cut costs? Do I increase my prices? Do I reduce jobs? Reduce hours? Do I look at the pension contributions? Every single option from that is a bad one for the economy.”
When Nigel Farage’s Reform UK is just one point behind you in the opinion polls, the last thing you want to be reminded about is Brexit.
If you’re Sir Keir Starmer, that is.
No doubt Poland’s prime minister, Donald Tusk, was trying to be friendly. After all, as Sir Keir said, they share a passion for Arsenal Football Club.
But when Mr Tusk declared at their joint news conference in Warsaw that his dream was “instead of a Brexit, we will have a Breturn”, Sir Keir visibly cringed.
Was it an ambush? Not quite. But it was certainly awkward for the UK prime minister. He stood stiffly and didn’t respond, not once uttering the word “Brexit”.
Mr Tusk, however, has form for bemoaning Brexit. He was, after all, the president of the European Council when the UK voted to leave the EU in 2016.
He might now be in his second spell as Poland’s PM, but his five years at the EU make him the ultimate Brussels insider, who’s never made any attempt to hide his feelings on Brexit.
Prior to the UK referendum, in September 2015, he said Brexit “could be the beginning of the destruction of not only the EU but also of western political civilisation in its entirety”.
His most outspoken attack on the UK’s Eurosceptics came in 2019 when the-then prime minister Theresa May was struggling to get a deal. He spoke of “what the special place in hell looks like for those who promoted Brexit“.
Sir Keir also visited Ukraine on his trip to Eastern Europe. Pic: PA
Standing alongside Sir Keir, he revealed that “for obvious reasons” they discussed co-operation between the UK and the EU. He recalled that his emotional reaction to the referendum in 2016 was “I already miss you”.
He went on: “This is not just about emotions and sentiments – I am aware this is a dream of mine, that instead of a Brexit we will have a Breturn.
“Perhaps I’m labouring under an illusion. I’d rather be an optimist and harbour these dreams in my heart – sometimes they come true in politics.”
Read more:
Badenoch says Tories made ‘mistakes’ on Brexit
Labour MPs told to back EU youth mobility scheme
A dream? Or a calculated move? As a Brussels insider, was Mr Tusk speaking for the EU as a whole? Was he doing Brussels’ bidding?
He may have returned to lead his homeland, but he remains a key player in Brussels.
On becoming Poland’s PM in 2023, he ended a dispute with Brussels which unlocked billions of frozen EU funds for his country.
He also orchestrated the return of his centre-right ally Ursula von der Leyen as European Commission president.
And Poland has just taken over the rotating presidency of the EU, which means Mr Tusk will be hugely influential once again, chairing meetings and setting agendas.
👉 Click here to listen to Electoral Dysfunction on your podcast app 👈
Poland is back in the European mainstream. It’s where Mr Tusk would like the UK to be as well.
It’s where, privately, Sir Keir would like the UK to be. It’s just that with Reform UK almost neck and neck with Labour in the polls, he daren’t say so.
Poland’s prime minister has said he hopes for the “Breturn” of the UK as a member of the European Union – as he discussed a defence treaty with Sir Keir Starmer.
Donald Tusk, who was hosting the prime minister for discussions on a UK-Polish defence pact in Warsaw, said it was his “dream” that “instead of a Brexit, we will have a Breturn”.
Standing alongside Sir Keir at a joint news conference, the Polish premier also said he had discussed greater cooperation between the UK and the EU.
Mr Tusk, who was the president of the European Council during the years that Britain left the EU, said: “For obvious reasons, we also discussed another issue, the cooperation between Great Britain and the European Union.
Politics latest: Reform and Tories ‘desperate’ in approach to Trump
“I’m sure you will recall when we learned about the results of the Brexit referendum. I was head of the European Council… at that time. My first emotional reaction was to say: ‘I already miss you.’
“I remember our press briefings as if it was yesterday. I already miss you, that’s what I said.”
He added: “This is not just about emotions and sentiments – I am aware this is a dream of mine, that instead of a Brexit we will have a Breturn.
“Perhaps I’m labouring under an illusion. I’d rather be an optimist and harbour these dreams in my heart – sometimes they come true in politics.”
Sir Keir, who held the role of shadow Brexit secretary while Labour was in opposition and backed remain in the 2016 referendum, has repeatedly ruled out rejoining the customs union or single market.
He has, however, said he wants to deepen post-Brexit ties with Brussels
Mr Tusk was speaking after Sir Keir travelled to Poland to discuss a defence pact with the NATO ally – which Mr Tusk said he hoped would be ratified “this year”.
The new treaty is designed to protect Europe from Russian aggression, tackle people-smuggling gangs, and combat misinformation and cyber threats.
Sir Keir was also asked whether the UK’s attendance at a defence summit in Poland earlier this week meant he was in favour of “creating an army” for Europe – to which he replied he was not.
Asked about the E5 defence ministers meeting in Warsaw and whether he supported creating a common European army, Sir Keir said: “The meeting that happened the other day is vitally important. That isn’t about creating armies.
“It’s about how we share our security concerns and build on what we’ve already got.”
Sir Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau. Pic: Reuters
As part of the defence pact, a £4bn partnership for new air defence systems in Poland has been agreed. The project will be headquartered in Bristol.
“The UK has secured £8bn of defence deals in Poland over the last three years alone, and we’re going further today, opening a new joint programme office in Bristol to deliver our £4bn partnership, to deliver the next generation of air defence systems to Poland,” he said.
He added: “We share an unbreakable commitment to NATO and an unbreakable commitment to Ukraine.”
During his visit to Poland, Sir Keir also made his first visit to Auschwitz, which he described as “utterly harrowing”.
The prime minister visited the former Nazi concentration camp, where he laid a wreath ahead of the 80th anniversary of its liberation.
After he and his wife Victoria, who is Jewish, visited the site, Sir Keir said: “Nothing could prepare me for the sheer horror of what I have seen in this place. It is utterly harrowing.
“The mounds of hair, the shoes, the suitcases, the names and details, everything that was so meticulously kept, except for human life.”
Sir Keir Starmer and his wife Victoria Starmer visit the Memorial And Museum Auschwitz-Birkenau. Pic: Reuters
Read more:
MP Mike Amesbury admits punching man
Plan for government-backed local grooming gangs inquiries
His visit to Poland came following a surprise trip to Kyiv on Thursday, where he reiterated his support for Ukraine and suggested that British troops could be deployed to the country as part of peacekeeping efforts.
In an exclusive interview with Sky News’ political editor Beth Rigby, Sir Keir said the UK would play its “full part” in any peace negotiations – including by deploying British troops for peacekeeping – though added that he did not want “to get ahead of ourselves”.
During his visit, Sir Keir also met Polish businesses, including the firm InPost which has announced it will invest a further £600m into the UK in the next five years to grow its operations.
It is thought that the overall £1bn investment by the firm, which operates parcel lockers, could support up to 12,000 new jobs.
Kalshi bettors put the odds of Trump creating a Bitcoin reserve in 2026 at roughly 70%.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports10 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway