The amount employers pay in national insurance is set to rise in next week’s budget to raise money for public services, Sky News understands.
Reports have suggested it could be increased by up to two percentage points and will – in part – be used to help fund the NHS.
A government source told Sky News: “There is a universal consensus that the NHS needs more money.
“That means asking businesses to help out.
“The choice is investment versus decline. She [Rachel Reeves] is choosing not to ask working people to pay the price for their [Conservatives’] failures.”
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According to The Times newspaper, Chancellor Rachel Reeves is also expected to make a significant cut to the earnings thresholds at which employers start making national insurance contributions.
The combined measures are expected to raise about £20bn and will represent the biggest tax rise in the budget.
The burden will reportedly fall entirely on the private sector, with public sector employers such as government departments and the NHS being reimbursed by the Treasury to avoid cuts.
On Friday, much of the budget chat focused on Labour’s definition of a “working person”.
The party’s manifesto said it would not increase taxes on working people, including VAT, national insurance, and income tax.
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This has prompted repeated questions about who the government considers to fall under that umbrella and therefore would not impose tax rises on.
During a broadcast interview at a Commonwealth summit in Samoa, Sir Keir Starmer told Sky News he does not consider people who have an income from assets such as shares of property to be working people.
“They wouldn’t come within my definition,” he said.
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Reacting to questions from journalists, Ms Reeves said the prime minister is a “working person”.
Speaking to LBC, she said: “The prime minister gets his income from going out to work and working for our country.
“He’s a working person. He goes out to work.”
Treasury minister James Murray told Sky News that “a working person is someone who goes out to work and who gets their income from work”.
Pushed further on whether a working person could also get income from shares or property, Mr Murray added: “We’re talking about where people get their money from, and so working people get their money from going out to work.
“And it’s that money that we’re talking about in terms of those commitments we made around income tax, around national insurance.
“That’s what’s important to focus on, where people are getting their money from, getting their money from going out to work.”