Labour's new "tax on jobs" and low earners risks provoking a backlash similar to the damaging rebellion over the abolition of the 10p tax rate, opposition parties warned Gordon Brown last night.
Both the Tories and Liberal Democrats quickly rounded on the Government's plan to push up National Insurance contributions, a move that will see employers and employees who earn more than £20,000 pay an extra 0.5 per cent from April 2011. And plans to cap public sector pay increases to one per cent will, in effect,cut pay for millions when inflation is taken into account.
Senior Tory figures hinted yesterday that they will look at repealing the rise in National Insurance after the next election. They plan to use the hike to combat Labour's claims of being the party of the many, while the Tories were only interested in helping the rich. George Osborne, the shadow Chancellor, said "Labour's tax on jobs" came at the worst possible time.
"Of all their tax rises, this is the one that the Conservatives will try hardest to avoid," he said. "Our priority must be to stop Labour tax rises on the millions of working people on average earnings. Now we know what Labour's class war means – a tax on anyone earning over £20,000."
The Liberal Democrats also suggested the policy could rebound on the Government. Vince Cable, the party's Treasury spokesman, said that while Alistair Darling had designed the pre-Budget report (PBR) to paint the Tories as the party of the rich, the Chancellor's proposals to limit public sector pay and increase National Insurance payments would end up "hitting his own people".
Mr Osborne accused the Government of "criminal irresponsibility" in failing to tackle record levels of debt, adding that Labour had "lost their moral authority to govern". He accused Mr Darling of deferring serious decisions needed to cut spending and tackle the deficit until after the general election, to curry favour with voters. "We were promised a pre-Budget report and what we got was a pre-election report," he said.
However, Mr Osborne said the chancellor had also been forced to reveal the "full scale of the economic disaster" facing Britain. "The biggest debt we have ever known, spending cuts on almost everything, taxes up on anyone who earns more than £20,000 – Labour's new tax on jobs," he said.
"Every family in the country is going to be forced to pay for years for this Prime Minister's mistakes. If you want to get on in life, if you want to own your own home, if you want to save for a pension or leave something to your children then the Labour Party is not for you any more."
He added that the figures showed that Mr Brown had failed to lead the country out of recession. "At the end of their period in office they have indeed adhered to the greatest of golden rules: never trust a Labour government with your money again."
Mr Cable said that Mr Brown would be hit by a rebellion on his own backbenches once the implications of the new measures on public sector pay and National Insurance had "sunk in". The Prime Minister was forced into a U-turn over his abolition of the 10p tax rate after protests from many within his own party. "The hidden costs of this budget will be borne by low-paid workers," Mr Cable said.
He added that measures on tackling offshore accounts and taxing bank bonuses were "tokenistic". He suggested that the one-off levy on bonuses over £25,000 would be unworkable in practice, as banks could divide up payments, defer them, pay benefits in kind or simply lump proposed bonuses into the basic salary of their workers. Others may also get round the rules by relating bonuses to years other than 2009. "It is the worst kind of gesture politics and a gift-wrapped invitation to tax avoidance," he said.Reuse content