Biased OBR paves the way for tax grab by Rachel Reeves, warns Jeremy Hunt

Ms Reeves and the Prime Minister deny the NI tax rise would break their pledge not to increase income tax, NI or VAT for “working people” as it targets employers rather than employees. However, the definition of a “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 is someone “whose main income arises from going to work every day”.

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

Asked whether the same protections apply to small business owners who rely on profits, she declined to make any guarantees, calling the question “hypothetical.”

But speaking to Trevor Phillips on Sky’s Sunday Morning, Lord King, who as Governor of the Bank of England was Ms Reeves’ boss when she worked there as an economist, said: “This whole debate about not taxing working people is terrible illusion. Really.

“Taxes are paid by people, not by companies or institutions, they ultimately fall on the amount people can spend, and you can only raise significant amounts of money by raising taxes on most people, however you define that. But most people will have to pay higher taxes.”

He also warned that the proposals meant companies were less likely to “agree to wage demands” and they were “likely to be less enthusiastic about creating new jobs”.

“Makes no real sense”

Andrew Haldane, the Bank’s former chief economist, said the distinction between those in work and those not in work “makes no real sense”.

“The truth is that during the course of this Parliament it is very unlikely that we will almost all not pay a little more tax to close this gap, whether we call ourselves workers or not,” he said.

A raid on inheritance tax credits could cost around 400,000 jobs, triggering a wave of liquidations of family businesses, according to new analysis from the Confederation of British Industry (CBI).

Fears that the Chancellor could scrap inheritance tax business relief, which allows business assets to be passed on tax-free when their owner dies, risks leading to the closure of hundreds of thousands of businesses, an industry group has warned.

The survey, carried out by the CBI for lobby group Family Business UK, found that 6 percent of family businesses would be wound up to avoid huge tax bills if their owner dies, the equivalent of 347,000 UK companies. A third of family businesses would also look to cut jobs if they were hit by tax.

In response to Mr Hunt, the OBR said its review findings would focus solely on the institutional relationship between the OBR and the Treasury and would not disclose recommendations to ministers or comment on ministers’ conduct or decisions. It said it could not disclose its report to Conservative ministers because some of the information may be market sensitive.

Robert Jenrick, the Conservative leadership contender, said: “Labour appears to be in cahoots with the OBR to justify huge tax rises on the British public. The OBR should not come to the aid of this government, which has lied through its teeth to the British public.”