Response from London

“There is a universal acceptance that the health system needs more money. That means we’re asking businesses to help. The option is an investment against decline,” a government source told the BBC.

It is not a random statement. Although the Labor government has been repeatedly advised not to use ominous language, its announcements have a “change or perish” air. The course of the “ship”, that is Great Britain, will be clarified in five days from now, in the official budget table of the new Chancellor of the Exchequer Rachel Reeves and under the weight of an ever-increasing public debt. Until then, however, the news of tax increases has not excited either employers or employees.

Not wanting to give more details, British Prime Minister Sir Keir Starmer, even from distant Samoa where he is participating in a meeting of the British Commonwealth, wanted to emphasize again that “we have to make difficult decisions”.

2% increase in employer contributions

These decisions, although it is not yet clear who they will burden the most, give the feeling that they are burdening the citizens of this country. Finance Minister Rachel Reeves, however, insists that “she will not make decisions that burden the worker” and will remain true to her pre-election commitments.

So we come to the news that in the upcoming budget table the insurance contributions of British employers are expected to increase. This increase is estimated at around 2% with the main goal of raising almost 20 billion pounds, which will be given to the public services of the country and mainly to the national health system, i.e. the NHS.

Until now, employers had to pay 13.8% of each employee’s salary for social security contributions, with the payment threshold being for wages of £175 a week or more. Now, according to the new measures that are likely to be announced, this rate will rise to 15.8%, with a simultaneous reduction of the minimum threshold for the application of the tax, i.e. £175 per week.

It is pointed out that social security contributions are the second largest source of income for the British state after income tax. In fact, the implementation of the new budget measures could start within weeks, rather than the start of the UK tax year in April.

Reactions to the increases

Possible decisions and changes do not have the best acceptance by employers. Businesses are reacting, saying that this new tax measure will put pressure on the labor market, since the room for wage increases will decrease and new hires will be even more difficult. Thus, they conclude that this will derail the government’s main objective of economic growth. Analysts even see that the business tax will also be affected. If the revenue for businesses is lower, then the tax will take the same course, with the government eventually losing its revenue elsewhere.

In a more general comment on the government’s actions, the Conservative party accused it of “redefining” the term “working class” in order to get the numbers in the budget.

It remains to be seen what the exact decisions will be on Wednesday as, among other things, the government considers freezing income tax thresholds, raising capital gains tax on sales of shares and property, and making changes to inheritance tax.