Reeves on levy: “Unfair, job taxing, manifesto-shredding, tax bombshell”

Below is the full text of the speech by Shadow Chancellor Rachel Reeves explaining why Labour will vote against the National Insurance rise.

There are two tests for the package announced yesterday. The first: does it fix social care? The second: is it funded fairly? The answer to both is no. It is a broken promise, it is unfair, and it is a tax on jobs. At the general election less than two year ago, the Prime Minister said to voters: “Read my lips – we will not be raising taxes on income, on VAT or National Insurance.” The Chancellor of the Exchequer went further and solemnly said: “Our plan is to cut taxes for the lowest paid through cutting National Insurance.”

They’ve broken their legally binding promise on international development and they’re breaking it again on the pension triple lock too. The country is now littered by Tory broken promises torn from their election manifestos of all the members opposite. Promises they made to their constituents and to the country. Promises used to count for something. Today, the ‘Tory word’ and ‘guarantee from the Prime Minister’ counts for absolutely nothing at all. No-one can ever believe a word the Prime Minister, the Chancellor or this Conservative government says again.

The government will claim that this is all down to the pandemic. But in March this year, a year into the pandemic, the Chancellor promised that National Insurance would not go up. He said: “We’re not going to raise the rates of income tax, national insurance, or VAT. Nobody’s take home pay will be less than it is now.” Another Tory promise up in flames. That was not before the pandemic – it was a year into it. And a matter of months later, this bombshell on work to fund social care is a broken promise, it is unfair and it is a tax on jobs.

No plan for social care. The sad truth at the heart of this so-called health and social care levy is that won’t even deliver for social care for at least three years from now – and even then it is uncertain what the government might allow to trickle down. Under the Prime Minister’s plan, many will still face the threat of selling their homes to fund their care. Someone with a house worth £186,000 would still have to pay £86,000 even with this cap – and that’s before living costs of going into a care home. How does the Chancellor suggest they pay those fees without selling their home?

Those in the NHS fear it will take this government a decade to clear the backlog. The social care sector is at the back of the queue. There is no plan from government for reforming a broken system to raise the quality of social care. There is no plan for care workers who have been underpaid and undervalued before the pandemic and before being sent out onto the front line by this government without adequate PPE. £8bn has cut been from social care by Tory governments in the years before this pandemic ignoring the rising demand with care workers paid less than they can live on.

This government are not interested in bringing employers and trade unions together for a positive plan for the future of social care. They’re not interested in making the care sector a career of choice with decent pay and conditions, proper investment in skills and a chance to progress. We know that half a million care workers are needed by 2030. 100,000 vacancies in social care before the pandemic, but this is set only to increase. The GMB union is predicting 170,000 vacancies for care workers by the end of the year. One in ten jobs unfilled.

Labour’s plans will prioritise older and disabled people, shifting the focus of support towards prevention and early help. Our guiding principle will be ‘home first’ – because that’s what the overwhelming majority of people want. And under Labour we’ll also build a strong and skilled social care workforce, with a new deal for care workers to create a well-motivated, skilled and properly rewarded workforce, with higher wages and more support for unpaid carers. People working in the sector are exhausted, they were looking for hope from the government and there is none.

The Tories are all tax and no strategy. When it comes to NHS and social care workers – last year the public clapped them, this year the Tories taxed them. There are far too many outstanding questions, with no detail published yesterday. What other tax rises on working people are down the line, given the Prime Minister has refused to rule further tax hikes out? Will council tax rise to make the sums add up? And how will the government relieve the burden on councils and care homes – again on which there was no detail yesterday.

Mike Padgham of the Independent Care Group said “it’s not clear how the money is going to the frontline”, that means providers squeezed and working conditions and pay impacted. This just does not add up. So much for the plan. What does this mean for ordinary working people funding it? The Chancellor’s tax on jobs doesn’t just let down those needing care or working in the care sector, it is an tax on all those in work. As daily Covid cases continue to climb, the only shielding this government is interested in is protecting the wealthiest few from paying more tax. A private landlord owning and renting out multiple properties won’t pay a penny more in tax, yet their hard-working tenants – working for a living – will be hit hard. It is deeply unfair. For this government the incomes of working people in this country aren’t of interest.

I asked the excellent staff of the House of Commons Library to examine the impact on a typical worker in constituencies like mine, like yours, and like that of the Chancellor. Let us imagine our worker is a new police constable, a single mum, with two children, earning £26,000 each year. She rents her home in the private sector. She is eligible for Universal Credit. What has this Conservative government done for her and her family? The Chancellor has frozen her pay this year. The Chancellor has frozen her income tax personal allowance. The Chancellor is taking £20 a week away from her and her family on Universal Credit. And her council tax bill has gone up by £80. And now the Chancellor has increasing her national insurance contributions by a further 1.25% of her income.

Why does this government keep going after the same people – time after time after time asking them to pay more? Because if you add it up, the total cost to her and her kids will be an extra one thousand two hundred and thirty four pounds next year. This isn’t a one-off. Analysis from the New Economics Foundation shows 2.5 million working households will be hit by the Tory double whammy of cuts to Universal Credit and the increase in National Insurance. They will lose out on £1,170 in next year, all at a time when the price of food, the price of petrol and the cost rent are going up.

In contrast, who has been shielded by the Chancellor? Which types of income will be paying no additional tax after today? Well they include those who get their income from financial assets, stocks and shares. Sales of property. Pension income. Annuity income. Interest income. Property rental income. Inheritance income. Fancy that. I don’t doubt the champagne glasses were clinking in Mayfair last night, toasting the Chancellor. But not in Middlesbrough or Mansfield, because they will be hit hard. 95% of the revenue the government plans to raise from this tax bombshell comes from employment. What a contrast.

Yesterday, Amazon reported an additional £1.9bn of sales – but only £3.8m more in corporation tax with much of their profits diverted to Luxembourg. Yet with the changes announced yesterday a graduate on a typical entry level salary will now pay marginal tax rate of almost 50%. Not a word from the Chancellor about any of this. Politics is about choices. There are other ways to raise this money. The Chancellor wants the country to believe this is the only way to do this. The point is that it’s not. The Prime Minister and Chancellor have deliberately chosen to go after those working hard for their money.

Labour understands – I understand – how hard people work for their wages. Madam Deputy Speaker, I don’t believe the Chancellor considers the lives of people outside this place in any detail before he takes his decisions like this. The government are rushing this through, without publishing proper analysis of the impact on jobs, on different parts of the country and on different incomes. Members know we are limited in how we can amend this bill this evening – that’s why we’ve put forward an amendment this evening calling for the assessment of this tax on job – and assessment that the Chancellor is unwilling to provide.

The government’s tax on jobs comes at the worst possible time. Businesses create jobs and will drive our recovery. Labour are a party that are pro-worker and proudly pro-business too and we want business to succeed – to invest more, employ more, pay more and create wealth. These are still precarious times with many businesses not back at full capacity and others considering how to repay their loans taken on during the pandemic. What does the Chancellor think the effect of his tax rise on jobs will be? He hasn’t set that out.

It could mean either an attempted squeeze on wages and conditions, higher prices for customers or the scaling back of recruitment and growth plans. It will affect people and it will affect the Exchequer too. It’s a false economy. The Chancellor doesn’t need to take my word for it. The British Chamber of Commerce describe it as “a drag anchor on jobs growth” and believe it will “dampen the entrepreneurial spirit needed to drive the recovery.” Make UK say it is “ill-timed as well as illogical”. The CBI has said it “will directly hurt a business’s ability to hire staff at a time when businesses have faced a torrid 18 months”. The Federation of Small Businesses warn that “this increase will stifle recruitment, investment and efforts to upskill and improve productivity in the years ahead”.

They are joined by the trade unions. The TUC say that it is wrong to hit young and low paid workers “while leaving the wealthy untouched”. And they are right too. This is a tax on jobs, it is a tax on the economic recovery and we will not support it.

Let’s go back to the key questions that need answering. Will this plan deliver what is promised for our health and social care sectors? No. Will it clear the NHS backlog this parliament? The Health Secretary won’t say. Will it give social care the resources it needs in the next three years? No. Is there a plan for reform for social care? No. Will it create more and better paid jobs in the wider economy? No. Is it fair across the regions? No. Will people be prevented from selling their homes to fund their care? No. Will this tax bombshell help our economic recovery? No, it will only slow it down. Is this the last tax increase this parliament? No. The Prime Minister cannot even guarantee that.

The whole thing is unravelling. No wonder Ministers are in a desperate rush to get it through. And the Chancellor, absent today – perhaps he has gone for a swim. Covid has tested the people of our country like nothing in any of our lifetimes. After the last year and a half, the country deserves a much better future. A recovery which enhances and enriches all our lives and in all parts of our country. Social care is a huge challenge facing our country. There are others challenges facing us too. We need to do things differently.

Labour’s test is simple: Does it fix the problem? And does it do so in a fair way. The answer to both those questions in relation to these proposals – is no. That is why Labour will vote against this unfair, job taxing, manifesto-shredding, tax bombshell this evening.