PRIME MINISTER Sir Keir Starmer has not dismissed the possibility of a National Insurance (NI) increase for employers in the upcoming Budget. In an interview with BBC Breakfast, Sir Keir avoided giving a clear answer on whether Labour’s manifesto promise to not raise taxes for “working people” would extend to employer contributions to NI. However, his remarks suggested that such an increase may be on the horizon.
The Labour Party’s 2024 manifesto explicitly ruled out raising NI, income tax, and VAT. Speaking from Downing Street, Sir Keir acknowledged that the upcoming Budget would be “tough” but said it would focus on “rebuilding our country.”
“We were very clear in the manifesto that we wouldn’t be increasing tax on working people,” Sir Keir stated. “It wasn’t just the manifesto, we said it repeatedly in the campaign, and we intend to keep the promises that we made.”
However, on Monday, Rachel Reeves, the Shadow Chancellor, clarified that Labour’s election pledge not to raise NI referred specifically to the employee portion of the tax, not the contributions paid by employers. Treasury officials are reportedly exploring ways to increase revenue by applying National Insurance to employer pension contributions.
According to the Institute for Fiscal Studies (IFS), introducing NI at the full 13.8% rate on employer pension contributions could raise up to £17 billion annually for the exchequer. Currently, employers pay NI at a rate of 13.8% on employee earnings above £175 per week. NI is also paid by employees who earn more than £242 per week or have annual profits exceeding £12,570, starting from the age of 16. However, it is not payable by individuals over the state pension age, even if they remain employed.
While speculation grows, the Prime Minister remains tight-lipped on the specifics of the Budget, due in just over two weeks. His refusal to rule out an increase in employer NI has led many to assume that it will happen, although government officials have not confirmed any changes. Business groups have reportedly been steered away from expecting an increase in the headline NI rate for employers.
The government’s handling of the matter has drawn criticism, particularly regarding its consistency with Labour’s manifesto promises. Conservative shadow chief secretary to the Treasury, Laura Trott, accused Labour of breaking its promise. She warned that an increase in employer NI would be “a tax on work that will deter investment, employment, and growth.”
Research from the Office for Budget Responsibility (OBR) indicates that higher employer NI contributions could increase hiring costs, potentially leading to slower job growth or stagnant wages. Paul Johnson, director of the IFS, told Times Radio: “It seems to me that [raising NI for employers] would be a straightforward breach of a manifesto commitment… it says very clearly we will not raise rates of national insurance.”
Daisy Cooper, the Liberal Democrats’ Treasury spokesperson, argued that the burden of the Budget should fall on large corporations like banks, social media platforms, and oil and gas companies, rather than small businesses.
As the government prepares for its biggest political and economic decision yet, the question of trust looms large. While Labour’s leadership maintains that it will keep its manifesto commitments, the implications of a potential NI rise for employers raise concerns about the broader impact on the UK’s business environment and its efforts to attract investment.
