A ‘biased’ OBR is paving the way for Rachel Reeves to collect taxes, warns Jeremy Hunt

Ms Reeves and the Prime Minister have denied that the NI tax rise will break their commitment not to increase income tax, NI or VAT on “working people” because it targets employers rather than employees. However, the definition of “working person” is coming under increasing scrutiny.

On Sunday, Bridget Phillipson, the education secretary, refused to say whether a small business owner earning £13,000 a year was a “working person” who should be protected from tax rises.

She said Labour’s definition of a working person was someone “whose main income comes from going to work every day”.

Ms Phillipson said this would apply to ministers like her who “won’t see higher taxes” when they look at their payslips after Wednesday’s budget announcement.

Asked whether the same protections apply to small business owners who earn income from profits, she declined to make any assurances, calling the question “hypothetical.”

However, on Sky’s Sunday Morning with Trevor Phillips, Lord King, who as Governor of the Bank of England was Ms Reeves’ boss when she was an economist there, said: ‘This whole debate about not taxing working people is a terrible illusion, really.

“Taxes are paid by people, not by companies or institutions, they ultimately come down to how much money people can spend, and significant amounts of money can only be raised by raising taxes on the majority of people, no matter how you wish it. But most people will have to pay higher taxes.

He also warned that the proposals mean companies are less likely to acquiesce to wage demands and are “likely to be less enthusiastic about creating new jobs.”

Inheritance tax raid threatens jobs

Andrew Haldane, the Bank’s former chief economist, said the distinction between those in work and those not in work “doesn’t make much sense”.

“The truth is that it is very unlikely that over the course of this Parliament almost all of us will end up paying a little more in tax to close this gap, whether we call ourselves working people or not,” he said.

Analyzes by the Confederation of British Industry (CBI) show that the introduction of inheritance tax relief could cost nearly 400,000 jobs, triggering a wave of liquidations of family businesses.

It is feared that the Chancellor may abolish inheritance tax relief for businesses, which allows business assets to be transferred tax-free after the owner’s death, which could result in the closure of hundreds of thousands of businesses, an industry group has warned.

A survey by the CBI for lobby group Family Business UK estimated that 6 per cent of family businesses would be liquidated to avoid paying huge tax on the owner’s death, equivalent to 347,000 UK businesses. A third of family businesses would also seek to cut jobs if they were hit by the tax.

In a response to Hunt, the OBR said the review’s findings would only cover the institutional relationship between the OBR and the Treasury and would not disclose advice to ministers or comment on ministers’ conduct or decisions. He said he could not reveal his report to Tory ministers because some of the information may be market sensitive.

Robert Jenrick, Tory leadership challenger, said: “Labour appears to be in cahoots with the OBR to justify huge tax rises for the British public. The OBR should not help this government which has lied to the British public.”