Keir Starmer refuses to rule out hike to employer national insurance

The Prime Minister has refused to rule out an increase in employer National Insurance contributions in the Budget.

During Prime Minister’s Questions earlier today, Rishi Sunak asked whether the government’s manifesto commitment to not increase taxes on “workers” applied to both employer and employee national insurance.

But the Prime Minister dodged the question. “We made an absolute commitment in relation to not raising tax on working people,” Keir Starmer replied.

The manifesto promises that “Labour will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

Both employers and employees pay national insurance. Under current rates, employees national insurance is set at eight per cent while the rate of employers national insurance is set at 13.8 per cent.

However, employers do not pay national insurance on pension contributions they make for their employers as part of a salary sacrifice scheme.

While the tax break is designed to encourage pension savings, reports have suggested that Treasury officials are drawing up plans to scrap the relief.

Former pensions minister Steve Webb has said the move could bring in as much as £23.8bn every year, enough to plug the alleged £22bn blackhole in the public finances.

However, the comments will do little to reassure businesses ahead of the upcoming Budget. Survey after survey has pointed to deteriorating business confidence, with firms increasingly worried that taxes will rise.

“Increasing employer NICs would mean breaking a Labour manifesto promise, and small businesses would be rightfully outraged,” Craig Beaumont, executive director at the Federation of Small Businesses (FSB) said.

According to the FSB’s research, employment costs hit a record high for small businesses last year, contributing to job losses across the economy.

“Adding employer NICs to pension costs would be one way of shrinking small business employment even more in 2025 – the precise opposite of what we all want and need to see, if we are to get economic growth up and running,” he argued.

Anna Leach, chief economist at the Institute of Directors, also noted that the changes would “increase the cost of employment” at a time when the government was also bringing forward substantial reforms to workers’ rights.

“It is crucial that government policy considers the impact on business in-the-round,” Leach said.

A survey released today by the Institute for Chartered Accountants of England and Wales (ICAEW) showed that business sentiment fell for the first time in a year during September, largely due to concerns about tax.