For several weeks, senior government figures have been strongly hinting that there will be increases to the amount of National Insurance paid by employers.
The Labour manifesto before the general election said that “Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT”.
This massively limits their options to raise more tax revenue.
But ministers appear willing to stretch the spirit if not the letter of their promise by putting up National Insurance on employers, some of whom – smaller businesses – would probably regard themselves as working people.
The chancellor is expected to give herself extra breathing space by changing the government’s self imposed rules on when it can borrow money, and has told some government departments that their budgets will be lower than they want.
A Labour source said that the negotiations on spending had provoked “significant angst” across the cabinet.
Shadow Chancellor Jeremy Hunt told the BBC: “During the election we repeatedly warned that Labour’s sums didn’t add up and that they were planning to raise taxes. The real scandal is that despite planning these tax rises all along, they didn’t have the courage to admit it to the public during the election campaign.
“Unfortunately, it looks like it will be people who have saved all their life to provide an inheritance to their family who will pay the price for Labour’s tax rises.”
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