Keir Starmer has denied misleading the public over tax rises in the Budget after he suggested “working people” did not make money from property or shares.
The prime minister also rejected claims he had waged a “war on middle Britain”.
Labour made manifesto pledges to not hike taxes on what it described as “working people,” explicitly ruling out increases to VAT, national insurance, and income tax.
But the chancellor Rachel Reeves is now expected to increase national insurance for employers, rather than employees, a move Labour insiders believe does not break any pledge.
Sir Keir’s comments on working people have also fuelled fears of other tax hikes, even though Downing Street later rowed back saying those with small amounts of savings in stocks and shares still counted as “working people” and that the Labour leader had meant someone who primarily gets their income from assets.
Among the levies that could be raised are capital gains tax, inheritance tax, and fuel duty.
Shadow chancellor Jeremy Hunt said that raising employer national insurance “is a jobs tax that is paid by working people. Not only will it harm businesses, it will also mean fewer jobs and lower wages”. He tweeted: “The IFS (think tank) has been clear that it’s a ‘straightforward breach’ of the Labour manifesto.”
At a press conference at the end of the Commonwealth Heads of Government Meeting in Samoa on Saturday, the prime minister was asked whether he was “plotting a war on middle Britain”.
“No. Let me clear about that,” he said. “What we’re doing is two things in the Budget.
“The first is fixing the foundations, which is dealing with the inheritance that we’ve got, including the £22bn black hole. We have to deal with that. In the past, leaders have walked past those problems, created fictions, and I’m not prepared to do that.”
Asked whether he had misled the public in the Labour manifesto, he added: “No, we were very clear about the tax rises that we would necessarily have to make, whatever the circumstances, and you’ve listed them there, and I listed them, I don’t know how many times in the campaign.
“We were equally clear in the manifesto and in the campaign that we wouldn’t be increasing taxes on working people, and spelt out what we meant by that in terms of income tax, in terms of NICs [National Insurance contributions] and in terms of VAT, and we intend to keep the promises that we made in our manifesto.”
During his trip, the prime minister told Sky News he did 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.
Ms Reeves is looking for £40bn in tax hikes and spending cuts in a bid to avoid a return to austerity in next Wednesday’s Budget.
Ms Reeves has admitted she will raise some taxes, blaming a £22bn black hole in the public finances which she says she discovered when she entered office.