Eng'iti
Elder Lister
Middle-class workers ‘face looming tax raid’
Transport Secretary indicates higher income earners may be called upon to plug financial black holeGift this article free
Credit: Sky News
Middle class workers will face higher taxes later this year, a Cabinet minister has suggested.
Heidi Alexander, the Transport Secretary, said the Government had promised not to increase taxes for “people on modest incomes”, and that Labour would base its policy on the “principle of fairness”.
Ministers have already hinted that Rachel Reeves, the Chancellor, is considering wealth taxes in her autumn Budget to fill a black hole worth tens of billions.
On Sunday, a Treasury spokesman said that the Government was committed to “keeping taxes for working people as low as possible”.
Labour pledged in its manifesto that it would not increase taxes on “working people”, ruling out increases in income tax, National Insurance and VAT, but Ms Alexander suggested Ms Reeves could be forced to look at those on higher incomes.
Tax burden on workers to jump
Taxes on employment as a share of gross pay
She told Sky News’ Sunday Morning with Trevor Phillips: “We made a commitment in our manifesto not to be putting up taxes on people on modest incomes, working people. We have stuck to that.
“We are determined, when it comes to taxation, that fairness is going to be our guiding principle.”
Asked whether wealth taxes were discussed at Sir Keir Starmer’s Cabinet away day on Friday, she said “not directly” but declined to rule out their introduction this year.
Her admission is the clearest indication yet that the Government will launch a raid on higher income workers, after a series of costly U-turns on benefit cuts and winter fuel payments.
The admission comes ahead of the Chancellor’s Mansion House speech this week, at which she will reportedly pledge a Thatcher-esque “Big Bang” in the City.
She is expected to announce a review of private sector pensions, which could result in employers being asked to pay more under auto-enrolment rules.
Ministers are concerned about the spiralling cost of the state pension and are considering reforms that would see workers rely more heavily on private schemes.
However, leading business groups told The Telegraph that the move would hammer struggling firms and keep down salaries.
Kate Nicholls, the chairman of UK Hospitality, said pubs and restaurants would be forced to “keep a lid on pay increases for managers and middle income earners” if the reforms were pushed through.
Craig Beaumont, the executive director of the Federation of Small Businesses (FSB), said changes to the pension rules would be a “nail in the coffin for job creation” and dampen economic growth.
The FSB’s recent poll of small businesses found that more firms are expecting to shrink or close this year than grow. It is the first time in 15 years that business confidence has fallen so low.
How is Rachel Reeves spending your taxes?
Enter your pre-tax salaryCalculate
Source: Institute for Fiscal Studies
Ms Reeves is also expected to announce plans to cut financial red tape and boost growth by making it easier to hire senior managers, and vow to change the City’s regulatory systems so it “regulates for growth”.
She is also expected to unveil further measures that stop green activists blocking investment in defence by bringing environmental, social and governance standards under the powers of the Financial Conduct Authority.
The Chancellor wanted to announce plans to limit cash ISAs, but following a backlash from building societies dropped the proposals last week.
Ms Reeves is already facing pressure from Labour MPs to levy higher taxes on the rich, amid dire forecasts for the public finances if revenues are not increased.
Some Labour figures including Lord Kinnock, the former party leader, and Baroness Morgan, the Welsh First Minister, would like to see the Chancellor introduce a flat tax on assets above £10 million.
Other politicians think the rate of tax on capital gains or dividend payments should be increased to align with income tax. Either policy would increase taxes on higher earners.
Ms Reeves is already widely expected to freeze income tax thresholds beyond the current deadline of 2028, dragging more workers into higher tax brackets and raising between £8 billion and £10 billion in revenue.
Andrew Griffith, the shadow business secretary, said Labour’s employment rights reforms risked “dragging Britain back to the worst economic mistakes of the 1970s”, adding that they would “price people out of jobs, deterring investment, and sending small businesses to the wall”.
Britain’s independent fiscal watchdog has already said that the plans will have a “probably net negative” effect on the economy that could be “significant”.
The Daily T
Why Starmer won't rule out a wealth taxLabour has struggled to define “working people” since pledging to protect them.
Sir Keir said in June they were “people who earn their living, rely on our [public] services and don’t really have the ability to write a cheque when they get into trouble”.
Ms Reeves appeared to contradict him the following day explaining her definition: “Working people are people who go out to work and work for their incomes.
“Sort of by definition, really, working people are those people who go out and work and earn their money through hard work.”
Labour struggles to define 'working people' Credit: Sky News | LBC
The party has already been accused of breaking its promise in last year’s Budget, when Ms Reeves increased employer National Insurance contributions in a raid that economists said would be passed on to workers through a reduction in real-terms wages.
Increasing business taxes again could allow Ms Reeves to claim to have kept to the promise, but firms have warned they face going bust or laying off employees to stay afloat.
Mr Beaumont said: “You won’t get growth or jobs if we get stuck in a cycle of constantly coming back with a new wave of employment costs, at the same time as the employment legislation heaps risk and so deters new jobs.”
A Treasury spokesman said: “The best way to strengthen public finances is by growing the economy – which is our focus. Changes to tax and spend policy are not the only ways of doing this, as seen with our planning reforms, which are expected to grow the economy by £6.8 billion and cut borrowing by £3.4 billion.
“We are committed to keeping taxes for working people as low as possible, which is why at last autumn’s Budget, we protected working people’s payslips and kept our promise not to raise the basic, higher or additional rates of income tax, employee National Insurance, or VAT.”
Last edited:
