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With Chancellor Rachel Reeves due to unveil her first budget next week, the government is expected to focus on capital gains, inheritance tax and employer contributions to pension funds to raise an estimated £35 billion.
Speaking at the Commonwealth Summit in Samoa, Starmer clarified that he views ‘working people’ as those who ‘go out to earn a living, usually paid in a monthly cheque’, as opposed to those who earn mainly from assets. Downing Street tried to soften his comments by explaining that Starmer was specifically referring to people whose primary source of income is assets, and not small-scale investors with modest savings.
Budget to impose record high tax burden
Rachel Reeves’ upcoming budget is expected to bring the biggest tax increase since 1993, pushing the UK tax burden to its highest level since record-keeping began in 1948. Reeves is reportedly focusing on increases in capital gains tax and employer contributions to national insurance for pension funds. measures that could have consequences for landlords, shareholders and employers with substantial contributions to employees’ pensions. These tax increases are part of Labour’s strategy to tackle what they describe as a £22 billion budget deficit, “real and not performative”, Starmer said.
Despite concerns that Labour’s approach could drive entrepreneurs out of Britain, Starmer pointed to last week’s successful investment summit as evidence that investors remain optimistic. He said global investors have confidence in Britain’s economic potential, partly thanks to the government’s proactive approach to fiscal management and structural reforms.
Defining ‘working people’ and potential tax targets
Starmer’s distinction between ‘working people’ and those who earn mainly from assets has raised questions about who will be targeted by Labour’s tax strategy. Finance Minister James Murray reiterated that Labour’s pledge to protect “working people” applies to those who get most of their income from labor rather than investment.
The definition has fueled speculation that capital gains taxes on profits from shares and property sales will be increased. There are also concerns about the possible imposition of national insurance on employer pension contributions, which is being criticized by some as a “direct breach” of Labour’s promises.
Tackling the budget deficit thoroughly
Starmer has insisted the Budget will tackle Britain’s fiscal problems head-on, saying he is “unwilling” to delay tough decisions. He described the budget as setting the direction for rebuilding the country’s economic foundations, a departure from the tendency of previous governments to postpone difficult choices.
“We need to get both aspects right,” Starmer said, “not just by recognizing the problems, but by rolling up our sleeves and tackling them.” His comments underline Labour’s intention to tackle the £22 billion deficit, laying the foundation for what Starmer describes as a “budget to rebuild the country.”
The reaction from investors and business groups was mixed, with some stakeholders welcoming the emphasis on stability and fiscal discipline, while others expressed concerns about the potential for capital flight and the broader impact on business confidence.
What the Prime Minister said:
In an interview with Sky News in Samoa, Keir Starmer was pressed about his manifesto pledge to protect ‘working people’ from tax rises and how he defined them.
‘For working people we have made an absolute commitment that their income tax would not go up, their NI would not go up, their VAT would not go up.
“I said we will keep those promises during the campaign. We will have to make difficult decisions in this budget, I am not going to prejudge the budget, you know that.
‘But what we are going to do, it is very important that we lay the foundations, that we clear up this mess once and for all and build a better Britain on that.
‘That will be measured by people feeling better off, in the NHS that is not only back on its feet but fit for the future, and in public services working in the way that people need their public services can expect.
“I would define a working person who goes out and makes a living, usually with a monthly check, but that’s obviously very broad, so let me be clear.
“What I mean, who I have in mind when I make the decisions as Prime Minister, are the kind of working people who go out, work hard and maybe save some money, but don’t have the means to write. a check to get out of trouble if they or their family get into trouble.
‘People who have this fear in their stomach that says: we are doing well, but if something were to happen to me or my family, I don’t have the resources to get out. .
“If I tell you who’s on my mind, I think everyone watching will know if they fall into that category, because in that situation you kind of carry a knot at the bottom of the stomach that when push comes to shove and something happens to me and my family. I can’t just write out a checkbook even if I have savings.
‘These are the kind of people I got into politics for to try to make sure they had a secure job and didn’t have the fear that public services wouldn’t work, to make them feel like they had better opportunities. ..that was who I had in politics. my mind’s eye.’
Asked whether this would include people who work but also get money from assets such as property and shares, Sir Keir said: ‘They wouldn’t meet my definition, but you can probably give me some examples. The second question to the first is you asking me for a definition of a working person and then making assumptions about what kind of taxes might go up.
‘You could do that exercise, or you could make sure that working people hear from me… people who watch this will know whether they belong to that group or not, people who work hard, who like to make ends meet want to tie knots, and they know that if something happens to them or their family, they can’t just write out a checkbook.
‘I’m really concerned about it, politics for me is who you have in mind when you make those decisions, I’m not ideological.
“I made clear promises in the election campaign and I intend to keep those promises, so let me be very clear about that.”