The Budget tax raid will harm wage growth and hiring, the Business Secretary has admitted.
Jonathan Reynolds accepted that the Chancellor’s plans to increase employer National Insurance contributions (NICs) and raise minimum wage will hamper businesses.
Speaking to Bloomberg Television, Mr Reynolds said that these tax hikes will “be something which affects how that
business operates, what they can do in terms of recruitment and pay.”
His comments come after Rachel Reeves on Wednesday unveiled plans to raise £25bn by increasing employer NICs to 1.2 percentage points to 15pc from April and lowering the level at which employers have to start paying it.
However, the Office for Budget Responsibility and independent think tank Institute for Fiscal Studies has since warned that raising NICs will raise only £10bn after accounting for lower pay awards and its decision to shield public sector workers.
The Chancellor also increased the the National Living Wage by 6.7pc to £12.21 an hour.
Mr Reynolds defended the Chancellor, who announced £40bn of tax rises in Labour’s first Budget in 14 years.
He said: “If you look at the overall tax position within the UK, if you benchmark some of these changes that we’ve had to introduce, there is no doubt the UK is still a globally competitive market.”
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