Budget: Rachel Reeves has left herself with very few political levers to pull to get hold of large sums of cash
In a classic piece of political understatement, a government source justified the coming £20bn rise in employer national insurance as “asking businesses to help out”.
This language of throwing a few quid in the collection pot belies the size of this tax hike.
It is huge. But that’s the point.
Having ruled out pushing up the big revenue raisers, Rachel Reeves has left herself with very few levers to pull to get hold of large sums of cash.
This move will be the largest tax rise in the budget, filling half of the £40bn the chancellor is trying to find.
The fact that national insurance is paid by businesses big and small increases the size of the net – meaning relatively small headline changes can yield big sums.
That’s also the downside though.
Groups representing small companies have already said this will make jobs harder to create and maintain.
So what of the politics?
At £20bn, the value of these tax rises mirrors almost exactly the cost of all 4p worth of cuts to employee national insurance pushed through by the last Tory government (with the support of Labour).
We’re essentially seeing a shift in the national insurance burden from workers to businesses.
But again, maybe that’s the point.
Analysis: Are Starmer and Reeves on the same page?
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Those with assets ‘not working people’
Much has been made of the fuzziness around Sir Keir Starmer’s attempts to define who the ‘working people’ are that he is seeking to protect from tax rises.
Government comms on the matter have been clunky.
But there’s also been something of a misreading of what that two-word phrase represents.
For some this has been a conscious and political choice.
Such as when one Tory MP suggested the prime minister believed anyone who owns a (tax-free) ISA doesn’t count as a working person.
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Will the chancellor’s fiscal plan work?
In fact, isn’t it more likely that the now fabled ‘working person’ was never meant as a technical definition, but rather a statement of political intent?
Consider these statements – reproduced here without endorsement – that Labour would like you to ingest:
If you’re among the 97% who doesn’t pay capital gains tax, we’re on your side.
If you’re among the 94% who doesn’t pay inheritance tax, we’re on your side.
Much has been made of Sir Keir’s definition of ‘working people’. Pic: PA
And yes, if you’re among the overwhelming majority of people whose biggest tax outlays are income tax, national insurance and VAT, we’re on your side too.
Set against that backdrop – even if we’re still unclear about who a ‘working person is’ – it becomes pretty obvious who the prime minister believes is not one.
And it’s a familiar and traditional Labour answer.
It’s the 1% as opposed to the 99%. The few, not the many. The rich rather than the poor.
But drawing a line like that when it comes to policy is harder.
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The modest-earning family with a few stocks and shares may wonder why they are now thrown in with the serial investors.
The small family-run bakery will ask why they are seeing their payroll taxes whacked up alongside the big corporates.
And economists will argue that business taxes like national insurance are always ultimately paid by workers eventually in the form of lower wages and fewer jobs.
Which leads us to what will likely be one of the central tensions in the budget.
The only solution to pay for public services in the long term is economic growth.
But can that growth be achieved when the interim funding fix relies on upping taxes on the rich and the private sector?
The chancellor will try to square that circle on Wednesday by announcing billions of pounds of extra investment borrowing.
But firms may still feel the government has bought them a fancy pair of trainers only to then break both their legs.
Politics
Norman Tebbit: Former Tory minister who served in Margaret Thatcher’s government dies aged 94
Norman Tebbit, the former Tory minister who served in Margaret Thatcher’s government, has died at the age of 94.
Lord Tebbit died “peacefully at home” late on Monday night, his son William confirmed.
One of Mrs Thatcher’s most loyal cabinet ministers, he was a leading political voice throughout the turbulent 1980s.
He held the posts of employment secretary, trade secretary, Chancellor of the Duchy of Lancaster and Conservative party chairman before resigning as an MP in 1992 after his wife was left disabled by the Provisional IRA’s bombing of the Grand Hotel in Brighton.
He considered standing for the Conservative leadership after Mrs Thatcher’s resignation in 1990, but was committed to taking care of his wife.
Margaret Thatcher and Norman Tebbit in 1987 after her election victory. Pic: PA
Tory leader Kemi Badenoch called him an “icon” in British politics and was “one of the leading exponents of the philosophy we now know as Thatcherism”.
“But to many of us it was the stoicism and courage he showed in the face of terrorism, which inspired us as he rebuilt his political career after suffering terrible injuries in the Brighton bomb, and cared selflessly for his wife Margaret, who was gravely disabled in the bombing,” she wrote on X.
“He never buckled under pressure and he never compromised. Our nation has lost one of its very best today and I speak for all the Conservative family and beyond in recognising Lord Tebbit’s enormous intellect and profound sense of duty to his country.
“May he rest in peace.”
Lord Tebbit and his wife Margaret stand outside the Grand Hotel in Brighton. Pic: PA
Tory grandee David Davis told Sky News Lord Tebbit was a “great working class Tory, always ready to challenge establishment conventional wisdom for the bogus nonsense it often was”.
“He was one of Thatcher’s bravest and strongest lieutenants, and a great friend,” Sir David said.
“He had to deal with the agony that the IRA visited on him and his wife, and he did so with characteristic unflinching courage. He was a great man.”
Reform leader Nigel Farage said Lord Tebbit “gave me a lot of help in my early days as an MEP”.
He was “a great man. RIP,” he added.
Lord Tebbit as employment secretary in 1983 with Mrs Thatcher. Pic: PA
Born to working-class parents in north London, he was made a life peer in 1992, where he sat until he retired in 2022.
Lord Tebbit was trade secretary when he was injured in the Provisional IRA’s bombing in Brighton during the Conservative Party conference in 1984.
Five people died in the attack and Lord Tebbit’s wife, Margaret, was left paralysed from the neck down. She died in 2020 at the age of 86.
Before entering politics, his first job, aged 16, was at the Financial Times where he had his first experience of trade unions and vowed to “break the power of the closed shop”.
He then trained as a pilot with the RAF – at one point narrowly escaping from the burning cockpit of a Meteor 8 jet – before becoming the MP for Epping in 1970 then for Chingford in 1974.
Lord Tebbit during an EU debate in the House of Lords in 1997. Pic: PA
As a cabinet minister, he was responsible for legislation that weakened the powers of the trade unions and the closed shop, making him the political embodiment of the Thatcherite ideology that was in full swing.
His tough approach was put to the test when riots erupted in Brixton, south London, against the backdrop of high rates of unemployment and mistrust between the black community and the police.
He was frequently misquoted as having told the unemployed to “get on your bike”, and was often referred to as “Onyerbike” for some time afterwards.
What he actually said was he grew up in the ’30s with an unemployed father who did not riot, “he got on his bike and looked for work, and he kept looking till he found it”.
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