In a recent exchange in the House of Commons, Kemi Badenoch, leader of the Conservative Party, leveled serious criticisms against Prime Minister Rishi Sunak’s government, accusing it of attempting to “milk the private sector.” This remark was made in the context of her party’s growing concerns about the government’s recent fiscal policies, including a notable increase in National Insurance (NI) contributions set to take effect in April 2025. Badenoch’s insistence on this matter marks her second appearance at Prime Minister’s Questions, where she pressed the Prime Minister on the implications of the NI hike, especially as it pertains to local councils and their capacity to manage increased costs associated with social care.
The debate over National Insurance has stirred considerable concern amongst various political leaders. In this heated discussion, Sir Keir Starmer, leader of the opposing Labour Party, pointed out the Conservatives’ conflicting positions regarding additional investments for key institutions such as schools and the National Health Service (NHS), which were touted in the government’s latest Budget. Highlighting potential contradictions, Starmer questioned the government’s plan for funding these aspirations, inferring that the narrative surrounding a so-called “magic money tree” was making a return, indicating a lack of sustainable financial planning from the Conservative side.
The specifics of the National Insurance increase, as laid out by Chancellor Rachel Reeves in her recent budget announcement, involve raising the employer’s tax on employees’ earnings from 13.8% to 15%. Additionally, the payment threshold is being lowered from £9,100 to £5,000. Reeves emphasized that the changes would collect an additional £25 billion annually, which she argued was essential for stabilizing the country’s public finances. Despite her claims, the ramifications of such a significant increase have raised alarm, particularly for businesses and local councils that may be disadvantaged under the new regulations.
Furthermore, it’s noted that while the NHS and other public sector bodies would be shielded from the NI rise, GP practices, operating as independent businesses while providing NHS services, would face challenges. In response to concerns raised about the impact on healthcare providers, Liberal Democrat leader Sir Ed Davey asked the Prime Minister for assurances that GPs and healthcare providers would be exempt from the mandated tax increases. Sir Keir assured the assembly that the government would ensure that GPs received the necessary resources, with detailed funding arrangements to be clarified later in the year.
Badenoch particularly highlighted the burden the NI increase would place on local councils, which would find themselves compelled to allocate additional funds toward social care provisions. She speculated whether the government might consider lifting the council tax cap, especially in light of what she described as a £2.4 billion deficit in local government funding. However, the Prime Minister reaffirmed that £600 million had been allocated within the Budget to assist with the pressures of adult social care. The discussion on the council tax cap was pointed; currently, local councils with social care responsibilities are restricted from increasing council tax by more than 5% without a local referendum. A spokesperson later confirmed that there were no plans to amend this cap.
The escalating difficulties faced by local councils were also highlighted by Badenoch, particularly mentioning recent cases where councils such as Nottingham, Birmingham, and Woking found themselves in financial distress, effectively declaring bankruptcy. These developments underline the pressing need for a resolution; many councils have called upon the government to reassess the cap to alleviate their fiscal pressures.
Concluding the inquiry, Badenoch seized the opportunity to lambast the Labour Party for what she described as a lack of substantive solutions, claiming their recent budget strategies were merely aimed at exploiting the private sector while masking their shortcomings. She criticized Starmer’s party, suggesting that their approach would only exacerbate financial chaos, leading to a “tax mess” and forcing public sector ministers into a situation where they had to seek bailouts. In response to the ongoing economic challenges, the Prime Minister reminded those present that the Conservative government had inherited a complicated fiscal landscape, referencing the past fourteen years of low growth and previous budget strategies, including Liz Truss’s controversial economic proposals, as factors complicating the current scenario.
