‘Biased’ OBR paves way for Rachel Reeves’ tax grab, warns Jeremy Hunt

Ms Reeves and the Prime Minister have denied that the tax rise in NI will breach their pledge not to increase income tax, NI or VAT for ‘working people’ as it is aimed at employers rather than employees. However, the definition of a ‘working person’ has come under increasing scrutiny.

On Sunday, Bridget Phillipson, the Education Secretary, refused to say whether a small business owner earning £13,000 a year is a ‘working person’ who should be protected from tax rises.

She said Labour’s definition of a working person is someone “whose main income comes from going to work every day”.

Ms Phillipson said this would apply to ministers like her, who “wouldn’t see higher taxes” when they looked at their pay slips on Wednesday after the budget.

Asked whether the same protections apply to small business owners who derive their income from profits, she declined to provide any guarantees, describing the question as “hypothetical.”

However, Lord King, who as governor of the Bank of England was Ms Reeves’ boss when she was an economist there, said on Sky’s Sunday Morning with Trevor Phillips: “All this debate about not raising taxes on working people is a terrible illusion . Real.

“Taxes are paid by people, they are not paid by companies or institutions, ultimately they depend on the amount people can spend, and you can only raise significant amounts of money by raising taxes on most people, however you want define That. But most people will have to pay higher taxes.”

He also warned that the proposals mean that businesses are less likely to “yield to wage demands” and are “likely to be less enthusiastic about creating new jobs”.

Inheritance tax puts jobs at risk

Andrew Haldane, the Bank’s former chief economist, said the distinction between workers and non-workers “didn’t really make sense”.

“The truth is that it is very unlikely that over the course of this Parliament, almost all of us will not be paying a little bit more tax to close that gap, whether we call ourselves working people or not,” he said.

An inheritance tax raid could cost nearly 400,000 jobs, leading to a wave of liquidations of family businesses, according to an analysis by the Confederation of British Industry (CBI).

Fears that the Chancellor could scrap the business exemption from inheritance tax, which allows business assets to be transferred tax-free on the owner’s death, threaten to force hundreds of thousands of businesses to close, the industry group has warned.

A CBI study for lobby group Family Business UK estimated that 6 percent of family businesses would be liquidated to avoid a huge tax bill on the death of their owner, equivalent to 347,000 British businesses. A third of family businesses would also want to cut jobs if they were hit by the tax.

In a response to Mr Hunt, the OBR said its investigation results would relate solely to the institutional relationship between the OBR and the Treasury and would not release advice to ministers or comment on ministers’ behavior or decisions. It said it could not reveal its report to Tory ministers because some of the information could be market sensitive.

Tory leadership candidate Robert Jenrick said: “Labour appears to be in cahoots with the OBR to justify huge tax increases on the British public. The OBR should not come to the rescue of this government, which has lied through its teeth to the British public.”