Reeves’ Budget left businesses reeling from the increased cost of hiring staff. Retailers and high-street companies pointed out that companies with lower-wage staff were disproportionately affected by the National Minimum Wage and National Insurance hikes. Minimum wage employees probably don’t count as “working people” according to Labour…
Now fresh research from the Centre for Policy Studies confirms the scale of the cost increase. In 2024, an employer paid £1,617 in NICs for every employee on minimum wage. This year that figure will be £2,583. The total cost for businesses to employ a full-time minimum wage worker on staff will be a whopping £2,367 higher than last year…
The ‘tax wedge,’ which is the total tax paid by employers and employees, will hit an eye-watering 21.3% of salary this year for minimum wage staff – that’s thanks to the NIC rise and the commensurate reduction in the payment threshold. It has previously stood at 18% in 2010 before dropping to 11% in 2015, and was only 17.5% in 2024. Now, wages will go down where possible or firms will hire fewer staff. Talk about January blues…
Over the weekend arch-Starmerite think tank Labour Together released its flagship immigration proposals for the government, which it calls “A migration system that puts country first.” The think tank echoes recent briefings from Downing Street in arguing that net migration needs to be substantially lower, and advocates “credible, long-term targets that lead to sustained reductions in immigration while ensuring that Britain’s economic needs are met” to do so. They also boast of their “close ties to the Labour leadership” while doing so…
SW1 expects the Morgan McSweeney-founded think tank’s plan to form a basis for medium-term immigration policy in No 10. It boasts three main features:
- A multi-year banded target for different migration routes and visas.
- A clear assessment of the benefits and costs of migration, for the economy, public services and infrastructure.
- An emergency break should numbers look set to exceed the overall total migration target.
Guido noticed a few similarities in the 8-page Labour Together report and a 117-page Centre for Policy Studies report co-written by Robert Jenrick in May this year. Some of them are:
- Caps on specific routes – LT: “The government can set out a range it is targeting for different migration types, over the short and long term, based on its wider economic and skills strategy.” CPS: “We should institute an annual cap or lock on each individual visa route, which should be set by Parliament under a ‘Migration Budget’ process. This dual approach, combining a more selective system with a series of caps, will allow us to filter for quality while still retaining control over overall numbers.“
- Migration budgeting process like the budget – LT: “This plan could be debated in Parliament. The Budget setting process is far from perfect, but it allows control and trade-offs to happen in a way that doesn’t happen in migration.” CPS: “We should institute an annual Migration Budget, organised by the Secretary of State and delivered to Parliament, underpinned by a report akin to the Red Book, with votable resolutions (analogous to Budget Resolutions) covering each of the main migration routes.“
- Need for better data on migrant fiscal impact – LT: “Certain migrants, like low-wage workers, may be a net fiscal cost to the government from their arrival in the country already, but this is not factored into the design of the system.” CPS: “The beefed-up MAC should lead a cross-Whitehall project to better understand the impact of migration. Part of this will involve producing lifecycle analysis of the fiscal impact of different profiles of migrant.“
- Wider impact of migration on infrastructure – LT: “the government can be clear how different routes are contributing to its priorities: supporting growth sectors in the industrial strategy, helping the government to cut waiting lists in the NHS, or supporting the higher education system through overseas students. At the same time, it can be up front about the wide consequences: to housing, to public services and to infrastructure.” CPS: “The share of the population arriving over the last 20 years has grown the population faster than the growth of transport infrastructure, GP surgeries and secondary schools. For England as a whole the growth of the housing stock was only just greater than the growth of the population accounted for by migration, putting upward pressure on housing costs.“
If Starmer goes ahead with his think tank’s proposals he will have Robert Jenrick and the Thatcher-founded CPS to thank for them. Imitation is the sincerest form of flattery…
A former Institute of Economic Affairs wonk has been abducted in socialist Venezuala for campaigning for democracy. Jesús Armas was working at the IEA in 2020 and has since become the organiser of the successful María Corina Machado campaign in Caracas. Efforts to monitor vote tallies in Venezuela’s July election proved that Machado’s candidate Edmundo González had beaten socialist dictator Maduro by a wide margin…
Armas, a Bristol University graduate, was last seen at 2100 last night exiting a coffee shop when he was abducted by men in a Toyota Fortuna. Guido hopes his safe return can be secured as quickly as possible…
UPDATE: The IEA has written to Lammy regarding the abudction. Read the full letter below:
Continue reading “Westminster Wonk Abducted in Venezuela for Opposition Campaign”
Ministers James Murray and Daniel Zeichner penned a piece in the Times last week defending Labour’s new farm tax. Incensed farmers are due to descend on Westminster next week in a protest attended by Jeremy Clarkson…
They brandish an intellectual foundation for their new tax:
“As tax and economics experts from the IFS and the Tax Policy Centre have suggested, these changes are reasonable and fair. These changes strike a balanced approach that will ensure we can continue to protect family farms while also allowing us to ensure stability in the public finances and fix the public services that those same farming families rely on.”
Guido didn’t recognise the Tax Policy Centre and asked the Treasury to clarify, which it did, that the ministers are referring to the Centre for the Analysis of Taxation (CenTax). That “think tank” is run by Arun Advani and Andy Summers, two of the three “wealth tax commissioners” who consistently push for huge tax hikes…
A 2023 IFS report called for the scrappage of Agricultural Property Relief and other “loopholes” on farms. It was written by Arun Advani.
Analysis calling for APR to be capped was produced by the IFS before the election this year. It was written by Arun Advani.
CenTax’s recent report calling for APR to be capped was written by Arun Advani. The think tank has, in fact, led the charge in calling for taxes on carried interest, the removal of the non-dom regime, and hikes in Capital Gains Tax. Reeves has contracted out her tax policymaking to far-left academics Advani and Summers…
Advani, who also sits on the advisory board of the OBR, himself said at Labour Conference that he was “optimistic” because the Labour government is “genuinely listening” to his ideas. The groundswell of support for Labour’s tax hikes is being entirely manufactured…
The wonks’ verdicts are in for Labour’s budget. They’re not fans…
UK Tax revenue is due to grow to the highest ever recorded level in history as a proportion of GDP. By the end of the decade 38.2p of every single £1 will be paid to HMRC…
Adam Smith Institute Director of Research Maxwell Marlow says: “The tax rises in this Budget will actively hurt working people. An increase in Employers’ National Insurance Contributions, which is a tax on jobs, will suppress wages and job creation. The hike to Capital Gains Tax too will keep productivity and wages low. The Government needs to outline a radical plan to boost growth and wages. This Budget is not it.” Verdict: Bad.
The Institute of Economic Affairs’ Executive Director Tom Clougherty says “the government is putting an awful lot of faith in its ability to choose and deliver public sector capital projects that deliver meaningful economic benefits. Few outside Whitehall will share their optimism… Without a radical, reformist agenda – a focus on the fundamental causes of our economic malaise – this government faces the same fate as its immediate predecessors: getting stuck managing Britain’s relative decline, with no clear plan to break free of it.” Verdict: Bad.
TaxPayer’s Alliance Chief Executive John O’Connell hits out at Labour’s election campaign: “We were consistently told that there was no need for big tax hikes because of a focus on growth, so taxpayers will be disgusted by the whoops and cheers of Labour MPs celebrating the fact that Rachel Reeves has just condemned the country to a record high tax burden. If the government ever wants to regain the trust of taxpayers it will need to rapidly find a way to halt the growing tax burden.” Verdict: Bad.
Centre for Policy Studies’ Director Robert Colvile says: “By hammering the private sector, she has delivered a Budget which – as the Office for Budget Responsibility’s own figures show – will reduce business investment, trade and private sector activity, propping up the economy via higher state spending… The Budget also leaves Britain with staggeringly high – and historically unprecedented – levels of tax and spending, with growth forecasts well below the levels required to sustain even current levels of welfare spending, never mind meet the demands of an ageing population.” Verdict: Bad.
Policy Exchange’s Head of Political Economy James Vitali says: “This Budget tilts resources away from the wealth-creating parts of our economy towards the public sector. It will be the working people of the UK who will suffer in the form of lower wage growth and higher tax bills.” Verdict: Bad.
The Trussite Growth Commission says “the bottom line overall is that less growth will mean an even bigger black hole to be filled in due course.” Verdict: Bad.
Outgoing Institute for Fiscal Studies Director Paul Johnson says: “Looks like what is going on here is short term fiscal loosening is boosting growth immediately. But hindering growth later on. Those later year forecasts are disappointing.” The IFS also accuses Labour of breaking its manifesto promise: “Somebody will pay for the higher taxes – largely working people. The employer NICs rise will further increase the incentive for employers to switch to contracting with the self-employed.” Verdict: Bad.
Tory centrist think tank Onward’s director Seb Payne says: “Rachel Reeves has delivered Labour’s most traditional budget since the 1970s. It ramps up borrowing for a short sugar rush of growth before slumping. Unless there are serious plans for supply side reform – with planning and nuclear power at the top of the pile – this risks being a Budget for stagnation, with living standards heading into decline.” Verdict: Bad.
The OBR isn’t exactly optimistic either…
BONUS REACTION: Kemi and Jenrick, one of whom will be Tory leader in a matter of days, respond:
Badenoch: “Labour had 14 years in Opposition to think about what they should do with the economy and this is what we get: higher taxes, more borrowing, and lower growth. We Conservatives cannot afford to make the same mistake. We need to return to principles and spend our time out of Government building a plan that will rewire the state, bring down taxes and reward the risk-takers and the entrepreneurs who create jobs and fuel economic growth.”
Jenrick: “This budget completes the biggest heist in modern history. Labour promised not to raise taxes, but this £40bn tax hike amounts to a £1,400 bill for every household. The British public are right to be furious that they were brazenly lied to. Forget boom and bust. Rachel Reeves will go down in history as the Gloom-and-Bust Chancellor. Reeves and Starmer conned the public at the General Election and working people are now paying for it with higher taxes and lower growth.”
Verdict: Bad.
Paul Johnson has just announced he is stepping down as Director of the Institute for Fiscal Studies. He’s been in post since 2011…
Johnson says “after 14 years at the helm, it feels like the right time to move on and start a new chapter in my life.” He will become Provost of Queen’s College, Oxford. The IFS says the search for his replacement will “take place over the next few months.” Plenty of tax fans circling around SW1 to choose from…
Speaking at his speech on how to achieve “progressive capitalism” Wes Streeting fired a dig and Andy Burnham:
“Bond markets are not bond villains and fiscal rules matter.”
