Rachel Reeves is risking a “bonfire of jobs” as she plots massive tax rises, businesses and MPs warn
RACHEL Reeves is risking a “bonfire of jobs” by hitting Britain with one of the biggest tax-hiking Budgets in history, businesses and MPs have warned.
The Chancellor is planning to raise an eye-popping £40 billion in levy rises and painful spending cuts.
Millions are set to pay more in income tax, employer National Insurance Contributions (NICs) , inheritance tax and fuel duty in her nightmare Halloween Budget.
Business chiefs, economists and Tory MPs all tore into the plans – warning it will lead to job losses, lower wages and higher prices.
The government’s own fiscal watchdog – the Office for Budget Responsibility – is expected to say the rise in NICs will mean “lower wages and higher prices”.
Tina McKenzie, from the Federation of Small Businesses, said: “Hiking small firms tax is a recipe for cuts to pay, hours and jobs.
“Tax on work should be going down, not up.”
Kate Nicholls, boss of UK Hospitality, said: “Increasing employer NICs would be a gut-punch to thousands of hospitality venues that are already struggling to pay the bills.
“These businesses want to create more jobs for local people but this tax increase will have the opposite effect.”
The Institute for Fiscal Studies think-tank said raising employer NICs is effectively “a tax on the earnings of working people”.
Laura Trott, the shadow Treasury Minister, said of NICs: “There is no two ways about it – this measure will cause a bonfire of jobs right across the country.”
Tory former Chancellor Kwasi Kwarteng said Labour risks entering a “doom loop” by raising taxes and killing growth.
He said: “They have given inflation-busting pay rises to the unions and that is why Rachel is now looking at freezing income tax thresholds.
“We tried to lower taxes, they are putting them up. If they don’t get any growth they will keep raising taxes.
“You will get a doom loop where you are putting up taxes and killing growth. She shouldn’t be putting up taxes. She should be curbing public spending.”
Planned tax hikes come on top of the government’s decision to increase the power of trade unions and impose more employment law red tape on businesses.
Panicked bosses warn they are being hit by a “triple whammy” of extra costs.
Around 25 per cent of pubs, bars and restaurants are already slashing their opening hours compared to last year, according to a UK Hospitality survey.
The group’s boss Ms Nicholls said “The government is hitting us with a triple whammy which is pushing up costs.
“They want big increases in the national living wage again – that has partly been driven by the big public sector pay agreements they have handed out.
“They have got their employment bill which brings extra costs for businesses.
“And now we are facing tax hikes. Something has got to give.”
Tom Clougherty, executive director of the Institute of Economic Affairs think-tank said: “Tax rises are always going to weigh on the economy and hit household budgets.
“If the books need to be balanced, it would be better to do it through spending cuts – while also reforming the state and public services for the long run.”
A record 632,756 firms are teetering on the brink of collapse, according to research by insolvency specialists Begbies Traynor.
A 1 penny rise in employer national insurance would mean a typical pub with 10 employees paying an extra £2,079 in tax, according to the FSB.
A typical small manufacturer with 50 employees would pay an extra £10,337 a year.
Meanwhile, several Cabinet big beasts – including Angela Rayner – are in revolt after being forced to find painful spending cuts by the Treasury.
Ministers could quit over the “harsh” settlements, government insiders fear.
An ally of Ms Rayner said: “I don’t recognise this depiction of Angela as a Queen Boudica in revolt.”
The Ministry of Justice is said to be unhappy with their settlement – having expected more cash to ease the prisons and courts crisis.
In transport, the popular £2 cap on bus fares could be scrapped because of the squeeze. Although dollops of cash are being found to extend HS2 to Euston in London.
Other departments are having to delay or scrap schemes to make their sums add up.
A senior Labour party insider: “There has been quite a bit of discontent across the cabinet – especially from departments with unprotected budgets. Things are pretty bad.”
A senior party figure on the Budget said: “There are going to be lots and lots of small bad things.”
A Cabinet minister said: “It is going to be a very very tight round.”
Another minister said: “Some departments are really going to suffer.”
Another insider said: “I think ministers could even walk over the spending cuts.”
Ms Reeves is refusing to tell Cabinet ministers what taxes are going up on their patch – sparking anger.
A source said: “They are being kept in the dark. It is all being seen as a big test of Rachel’s personal authority.”
Ms Reeves has accused the Tories of leaving a giant “blackhole” which has left her having to make hugely painful decisions.
Taxes will be ramped up and spending cut to plug the gap and get the country’s coffers in better nick, her allies have said.
But she will tear up fiscal rules so she can borrow more for big infrastructure projects in a bid to boost growth.
Labour’s poll ratings have taken a battering since their landslide election victory on July 4.
The PM sacked his chief of staff Sue Gray and promoted his right hand man Morgan McSweeney as part of a reset earlier this month.
Mr McSweeney is planning to appoint more people to No10 as he feels the political operation is “underpowered” and they need to get on the front foot.
A spokesman for Ms Reeves said he would not speculate on Budget reports.