Autumn Budget 2024: Working people debate a ‘terrible illusion’, former Bank of England governor says
Chancellor Rachel Reeves is set to increase taxes significantly in Wednesday's Budget, with reports indicating that she will raise £20bn by hiking employers' national insurance.
The debate around whether the government is putting up taxes on working people is a “terrible illusion,” Mervyn King, former governor of the Bank of England, said today.
Chancellor Rachel Reeves is set to increase taxes significantly in Wednesday’s Budget, with reports indicating that she will raise £20bn by hiking employers’ national insurance.
The government has claimed that it is not breaking its manifesto commitment to not increase taxes on ‘working people’, although it has struggled to define exactly what ‘working people’ are.
King, Governor of the Bank from 2003 to 2013, said that whatever the definition, the end result of a big tax increase was the same.
“Taxes are paid by people, they’re not paid by companies or institutions,” he said on Sky News’s Sunday Morning With Trevor Phillips programme.
“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 continued.
He suggested that companies would be less likely to create new jobs and increase wages as a result of the measure.
Alongside increasing employers’ national insurance, Reeves is likely to extend the freeze on income tax thresholds for another year alongside a number of smaller revenue raising measures.
Paul Johnson, director of the Institute for Fiscal Studies, said it would be “one of the biggest tax-raising budgets ever”.
Despite this, Johnson warned that a lot of public services – such as local government, justice and social care – would still feel “squeezed”.
“Now part of the problem of course is the NHS is so big that if, for example, they were to be as generous as four per cent or five per cent a year increases…that still leaves other departments quite tight: increases in their budgets but probably not even increases in line with national income,” he said on Sky News.
