Flynn demands NICs rethink or risk ‘Reeves recession’ – Daily Business

The SNP has warned that the Labour Party is risking a ‘Reeves Recession’ if the Chancellor fails to reverse the hike to employers’ national insurance contributions on businesses, charities, and the public sector.

Stephen Flynn, the SNP’s Westminster Leader has described the increases, imposed from tomorrow, as “the worst possible economic policy at the worst possible time”.

Coming on top of Donald Trump’s tariffs, Mr Flynn says that Rachel Reeves must rethink her fiscal rules as “the only reasonable response to the changed global economic landscape”.    

Andy Haldane, former chief economist at the Bank of England, warned this week that “adhering to existing fiscal rules risks underinvesting today in tomorrow’s economic and environmental health” adding that the UK’s current fiscal rules “dent growth, weaken macroeconomic resilience and amplify the doom loop”.

Mr Flynn said: “The Chancellor needs to rethink and rapidly reverse imposing this damaging jobs tax at the very same moment that businesses are being hit by Trump tariffs – if they fail to do so, the Labour Party will be choosing to inflict the worst possible economic policy at the worst possible time.

“One act of economic vandalism imposed from across the Atlantic shouldn’t be followed up with another one here at home. If the Chancellor fails to rapidly reverse this jobs tax, then Labour will be directly responsible for risking a Reeves Recession.

“As a global economic storm gathers, the Labour Party’s current plan seems to boil down to a return of austerity cuts alongside the risk of a recession. 

“Instead of doubling down on a failed plan that isn’t working – a plan that will destroy jobs, reduce investment and squeeze workers’ wages – now is the moment for Labour to admit their own failure and to stop pursuing policies that will make things even worse.   

“The Chancellor keeps telling us that the ‘world has changed’ as a ploy to justify Labour’s broken promises – but if she truly believes her own words, surely now is the time to remove the straitjacket of the Tory fiscal rules she has chosen to restrict herself within.

“That would allow the fiscal flexibility to end austerity cuts and provide the fiscal firepower needed to seriously invest in growth.”

Separately, the Chartered Institute of Taxation has reissued figures showing how income tax changes for Scottish taxpayers will differ those those in other parts of the UK, and how more will be dragged into higher rates because of ‘fiscal drag’.

Increases to the basic and intermediate tax thresholds mean that Scottish taxpayers will pay up to £14.51 less income tax in the coming tax year than in 2024/25.

Scottish taxpayers earning more than £30,318 will pay more income tax than a taxpayer in the rest of the UK with the same earnings, up from £28,867 in 2024/25.

Conversely, the 19p starter rate of tax means that someone with earnings under £30,318 in Scotland will pay up to £28.27 a year (around 54p a week) less than someone in the rest of the UK.

The freezing of the UK-wide personal allowance, together with Scottish decisions to freeze the higher, advanced and top rate thresholds, means fiscal drag is likely to bring more Scottish taxpayers into these higher rates of tax as earnings rise.

Lindsay Scott, CIOT Technical Officer, said: “December’s budget may have brought the tax increases of recent budgets to an end, but their effects remain.

“Even with a largely standstill income tax policy, the decisions of previous years mean that the Scottish income tax regime will continue to be slightly more generous to those earning less than £30,318, and increasingly less so for everyone else.

“And there will be an ever so slight reduction for all Scottish taxpayers relative to the year just ending of up to £14.51 due to the increases to the basic and intermediate thresholds.”

The table below was published following the Scottish Budget announcements of 4 December 2024.

The first two columns show the income tax and National Insurance liabilities for employees across a range of income levels. The third column shows the differences between Scotland and the rest of the UK in 2025/26 and the final column, the difference between Scottish liabilities in the coming year and the year just ended (2024/25).

Note that while Wales has the power to set a Welsh Rate of Income Tax, it has chosen to retain parity with the rates that apply in England and Northern Ireland.