Prime Minister Sir Keir Starmer has sparked controversy by suggesting landlords and shareholders do not fall under his definition of “workers” as Labor prepares for one of the biggest tax rises in modern history.
As Chancellor Rachel Reeves prepares to unveil her first Budget next week, the government is expected to target capital gains, inheritance tax and employer contributions to pension funds to raise an estimated £35bn.
Speaking from a Commonwealth summit in Samoa, Starmer made clear that he considered “workers” to be those who “go out and make a living, usually paid by a monthly cheque”, compared to those who earn primarily from assets. Downing Street tried to soften his comments, clarifying that Starmer was specifically referring to people whose primary source of income is assets, not small investors with modest savings.
Budget to impose a record tax burden
Rachel Reeves’s upcoming Budget is expected to bring the biggest tax rise since 1993, pushing the UK’s tax burden to its highest level since records began in 1948. Reeves is said to be focusing on increasing capital gains tax and employers’ National Insurance contributions to pension funds . Measures that could affect owners, shareholders and employers with significant employee pension contributions. Starmer said these tax rises are part of Labour’s strategy to tackle what they describe as a £22bn fiscal deficit, “realistically rather than performatively”.
Despite concerns that Labour’s approach could push entrepreneurs out of the UK, Starmer pointed to last week’s successful investment summit as evidence that investors remain optimistic. He said global investors were confident in Britain’s economic potential, partly due to the government’s proactive approach to fiscal management and structural reforms.
Identify “employees” and potential tax targets
Starmer’s distinction between “working people” and those who earn primarily from assets has raised questions about who will be targeted in Labour’s tax strategy. Treasurer James Murray reiterated that Labour’s pledge to protect “working people” applies to those who derive most of their income from employment rather than investments.
The definition has raised speculation that the capital gains tax on dividends and property sales will be raised. There is also concern about the potential for National Insurance to be imposed on employer pension contributions, which some have criticized as a “flagrant breach” of Labour’s manifesto commitments.
Addressing the financial deficit directly
Starmer has insisted that the budget will address the UK’s financial challenges head-on, indicating that he is “not prepared” to delay difficult decisions. He described the budget as setting the direction for rebuilding the country’s economic foundations, and it is a departure from the tendency of previous governments to postpone difficult choices.
“We have to get both things right, not just acknowledge the problems, but roll up our sleeves and deal with them,” Starmer said. His comments underscore Labour’s determination to tackle the £22bn deficit, laying the foundation for what Starmer has described as a “rebuild the country budget”.
The response from investors and business groups was mixed, with some stakeholders welcoming the focus on financial stability and discipline, while others expressed concern about the potential for capital flight and the broader impact on business confidence.
What the Prime Minister said:
In an interview with Sky News in Samoa, Keir Starmer was pressed on his manifesto pledge to protect “working people” from tax rises and how he defines it.
“For working people, we have made an absolute commitment that their income tax will not rise, their NI will not rise, their VAT will not rise.
I said that we will fulfill these promises during the election campaign. We’re going to have to make tough decisions in this budget, and I’m not going to get ahead of the budget you know.
He added: “But what we will do is that it is really important that we fix the foundations, that we clean up this mess once and for all, and that we build a better Britain on that foundation.”
He added: “This will be measured by how people feel they are doing better, in the NHS, not just getting back on its feet, but being fit for the future, and public services operating in the way people can expect to see from their public services.”
“I would define a working person who goes out and earns a living, usually via a monthly check, but that is obviously too broad so let me be clear.
“What I mean is that what I have in mind when I make decisions as prime minister are the kind of working people who go out and work hard and maybe have a little money saved but don’t have enough to write a check to get out of difficulties if they or their families get into difficulties.
“People who have this anxiety, if you like, are saying in the bottom of their stomach, ‘We’re doing all right, but if something happens to me or my family, I don’t have enough to get out of it.’” .
“When I tell you who I have in mind, I think everyone who watches me will know whether he belongs to this category because you carry in that situation a kind of knot at the bottom of your stomach that if something happens to me and my family I can’t have a checkbook, even if I have savings.
“They’re the kind of people I came into politics to try to make sure they had secure jobs, didn’t have to worry about public services not working, to make them feel like they had better opportunities… That’s what I had in my mind’s eye.
Pressed on whether that included people who work but also make money from assets such as property and shares, Sir Keir said: “They wouldn’t meet my definition, but you could probably give me any number of examples, you’re adding the second question to the first question is You’re asking me to define a working person and then make assumptions about what kind of taxes could go up.
“You can do this exercise or you can make sure the workers hear from me… The people who watch this will know whether they are in that group or not, the people who work hard, who are eager to make ends meet, who know that if something happens to them or For their families, they can’t just write a checkbook.
“I’m really concerned about them, politics for me is what you keep in your mind’s eye when you make those decisions, I’m not an ideologue.
“I made clear promises on the campaign trail and I intend to keep those promises, so let me be very clear about that.”