Workers face losing £3,000 each after Wednesday due to Labour Budget

Workers face losing £3,000 each under new National Insurance rules coming from the Labour Party government in tomorrow's Budget. Senior government ministers have refused to rule out increasing the rate at which employers pay NI in this week’s Budget.

There is also speculation that Rachel Reeves could change the rules so employers have to pay NI on pension contributions. Research from the think tank PolicyEngine suggests that if employer NI contributions increase by one percentage point - rising from 13.8% to 14.8% - businesses may reduce salaries to balance the higher cost.

Currently, for an employee earning £30,000, an employer pays £2,884 in NI contributions, making the total cost of employment £32,884. Under the proposed increase, contributions would rise to £3,093 for the same salary.

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To maintain the total employment cost, employers might adjust salaries to £29,818, reducing employees' annual income. Tom Clougherty, executive director of the Institute of Economic Affairs think tank, said the rumours of National Insurance changes showed that higher taxes on businesses often meant that workers ended up bearing the burden through lower wages.

Mr Clougherty added: “Tax affects behaviour – and the choices people make in response to a tax increase (or a tax cut) can have a significant impact on how much revenue is raised. A good tax system would seek to be as transparent as possible about who really foots the bill, while also seeking to minimise its impact on economic decision-making.”

Nikhil Woodruff, chief technology officer at PolicyEngine, said: “Our analysis reveals that reforms to employer-side National Insurance could generate billions in revenue, but the actual amount depends on how employers pass on the costs – with full pass-through to employees lowering the revenue impacts by up to 50pc.”

Experts have criticised the “outrageous” move which risks deepening the gulf between private-sector pensions and the much more generous public-sector schemes.