Tax rises needed to prevent austerity, says Keir Starmer

Leading economists have warned that it will be workers who eventually pay for a rise to the rate of National Insurance paid by employers.

Paul Johnson, the head of the influential Institute for Fiscal Studies think tank, told the BBC’s Today programme that when employer National Insurance contributions go up, often they are “passed through to working people”.

He also suggested that in fact, employees might well be be more affected than self-employed people or small business owners by the potential change.

“Unless their taxes are raised in the same way that employer national insurance is going to be raised, that’s a very big tax rise that will effectively only impact workers,” he said.

The former Bank of England governor Lord King of Lothbury also said the debate about not putting taxes up for working people was a “terrible illusion”.

“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 it’s most people will have to pay higher taxes,” he told Sky News.

Critics have argued that employees will also face a greater burden as the chancellor is expected to extend the freeze on income tax thresholds, which is currently due to end in April 2028 and sees people pulled into paying higher rates through a phenomenon known as “fiscal drag”.

The government is also reportedly looking at increasing tax on asset sales, such as shares and property, as well as changing its own self-imposed rules on how its debts are measured to free up money for spending on infrastructure projects.

Speaking to the Sunday with Laura Kuenssberg programme, Conservative shadow science secretary Andrew Griffith said Labour had “essentially lied to the British people in terms of their plans”.

He added that at a time when there was a “crisis of trust in politics”, they “behaved at the very least like the worst form of dodgy car hire firm, conjuring up small print that never existed”.

Liberal Democrat leader Sir Ed Davey said the previous Conservative government “unquestionably left our economy in tatters… yet the new government can not allow the burden of fixing this mess to fall on families and small businesses already suffering from past Conservative tax rises”.

He urged Labour to “look to the big banks, big tech companies and the oil and gas giants to raise the money needed”.