The Labour Government and Chancellor Rachel Reeves have promised not to raise taxes on “working people” in Wednesday’s much trailed budget. But Ministers have been unable to define exactly who counts as a working person.
Prime Minister Keir Starmer said a working person is someone who “goes out and earns their living” and can’t just “write a cheque” to get themselves out of trouble. He said working people “know exactly who they are” as he promised to protect their pay from the tax hikes his Government has warned are on the way.
Sir Keir said people who get added income from assets such as shares or property wouldn’t come within his definition of “working people”. But later the Prime Minister’s spokesperson said those with a “small amount of savings” could still be defined as working people. For the latest Welsh news delivered to your inbox sign up to our newsletter
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This could include cash savings, or stocks and shares in a tax-free Individual Savings Accounts (ISA), he suggested. But a figure of how much could be held in them, to remain a “working person” wasn’t given.
Rachel Reeves said working people are “strivers who graft”. Writing in last week’s Sun on Sunday she said her Budget is for “hardworking families” and promised: “I’ve got your back. This is your Budget. I will deliver for you. It’s a Budget for the strivers.”
Treasury Minister James Murray had another definition: “Working people are people who go out to work for their income,” he told the BBC’s Nick Robinson on BBC Radio 4’s Today programme.
Asked repeatedly if landlords, or if those with shares, are working people, Murray said: “We’re talking about where people get their income from,” he said, adding ministers wanted to protect people who “get their income from work.”
Education Secretary Bridget Phillipson also told the BBC that “working people” were those whose main source of income came from “going out to work”. Asked if she thought business owners could be considered working people, Phillipson added: “Working people will not see higher taxes in the wage slips that they receive following the Budget.”
Asked if landlords are “working people” senior minister Pat McFadden told Sky News: “I don’t think it’s about definitions of this job, that job, some income level where if you earn a pound more than that you’re not a working person.”
Meanwhile Labour insists that raising National Insurance (NI) contributions paid by employers doesn’t break its pledge to protect “working people”. But those running small businesses, like hairdressers, who go out to work on their feet all day, will be affected by the rise in NI employers have to pay, some have argued.
Polls still show that most voters who switched to Labour in the election are willing to have some short term pain for longer term gain. They would rather better public services than tax cuts.
Former Bank of England governor Mervyn King has warned that the impact of a big tax increase will be the same wherever it lands. Employers face higher NI payments will claw that back by being less likely to create new jobs or increase wages, he has argued.
“Ultimately, they fall on the amount that people can spend, and you only can raise significant amounts of money by raising taxes on most people, however you care to define that, but most people will have to pay higher taxes,” Mr King told Sky News.
Paul Johnson, the director of the Institute for Fiscal Studies claims an increase in NI paid by employers would be a “straightforward breach” of Labour’s manifesto commitment.
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