Warning of tax rises amid £15.6 billion black hole in government finances
The gap between income and spending has fuelled speculation that the Chancellor Rachel Reeves will have no option but to raise taxes.
Spring Budget: National Insurance cut discussed by Fowles
Labour faces a £15.6 billion "hole to fill" due to cuts in National Insurance by the Conservatives ahead of the general election, experts have warned.
The gap between income and spending has fuelled speculation that the Chancellor Rachel Reeves will have no option but to raise taxes.
The warning comes from tax and audit experts Blick Rothenberg and is based on an analysis of HM Revenue and Customs (HMRC) figures.
National Insurance levies on salaries were cut by the last Conservative Chancellor, Jeremy Hunt, by 12 percent to 8 percent as the party presented itself as cutting taxes for workers to win votes ahead of the election.
At the same time, the rate paid by the self-employed fell from 9 percent to 6 percent.
As a result, the Tories claimed the average employee making around £35,400 annually would save over £900 a year.
Joe Neal, a tax manager at Blick Rothernberg, criticised the last Government's National Insurance cut as a blatant pandering for votes.
He said: "The Conservatives in their last few budgets reduced the main rate of NI for employees from 12 per cent to eight per cent and for self-employed individuals from nine per cent to six per cent cent.
"This was a last-ditch attempt to win votes in the election. But has now left Labour with a headache of how to fill the gap."
He added: "HMRC's latest stats released today reveal that the NI takings for the first two months of the 2024/25 tax year are £2.65 billion less than the first 2 months in 2023/24.
"The takings in April and May 2024 were £25.1bn compared to £27.7bn in the April and May 2023.
"Overall this means that NI takings are £1.3billion down each month compared to the previous year. Extrapolated out this could be £15.6billion over the course of the year that Labour will have to find from somewhere."
Mr Neal told GB News: "Labour have already pledged not to increase income tax, NI or VAT so it remains to be seen how this hole will be filled."
Paul Johnson, the director of the Institute for Fiscal Studies, said the pressures on spending - including from public sector pay - are so powerful: "The pressure to change the fiscal rules or find more money from tax will be
quite significant."
