What does Labour mean when it talks about “working people”?

Amid speculation over what tax increases may be set out by Chancellor of the Exchequer Rachel Reeves in Wednesday’s Budget, a commitment by the Labour party to “not increase taxes on working people” has been the focus of attention, with senior party figures having given various different definitions of what “working people” actually means.

We’ve taken a look at what Labour has said about its plans for taxation, and what the phrase “working people” could imply ahead of the Budget.

What did the manifesto say?

The phrase “working people” appeared 21 times in Labour’s general election manifesto, but without a precise definition.

On tax, the manifesto states: “The Conservatives have raised the tax burden to a 70-year high. We will ensure taxes on working people are kept as low as possible. Labour will not increase taxes on working people, which is why we will not increase National Insurance, the basic, higher, or additional rates of Income Tax, or VAT.”

What has Labour said?

Labour does not appear to have agreed on one specific definition of what it means by “working people”.

During the election campaign, Sir Keir Starmer said: “The person I have in my mind when I say working people is people who earn their living, rely on our services, and don’t really have the ability to write a cheque when they get into trouble”, while Ms Reeves said working people “are people who get their income from going out to work everyday, and also pensioners that have worked all their lives and are now in retirement, drawing down on their pensions”.

In the lead-up to the Budget various Labour politicians have been asked to define what is meant by “working people”.

Treasury minister James Murray MP told the BBC Today programme last week: “Working people are people who go out to work for their income”, while science and culture minister Chris Bryant MP described the phrase as “a shorthand in political circles … for the people who were particularly disadvantaged in the cost of living crisis”.

Speaking on 25 October, Mr Starmer said he defined a working person as someone who “goes out and earns their living, usually paid in a sort of monthly cheque” and who can’t “write a cheque to get out of difficulties”, and that someone whose income came from assets (like property or shares) would not fall within his definition.

A Downing Street spokesperson later clarified that the Prime Minister was referring to people who “primarily get their income from assets”, and “working people” did not exclude those with a small amount of savings, or stocks and shares.

Following Mr Starmer’s comments, Ms Reeves told LBC that she had committed to not increasing the “key taxes that working people pay”—referring to “National Insurance, income tax and VAT”.

And in a speech on Monday, 28 October, Mr Starmer said that “the working people of this country know exactly who they are”, describing them as “the golden thread that runs through our agenda”.

What taxes might Labour increase?

We already know about some tax changes planned by Labour. The party’s manifesto sets out a number of specific tax policies, including: reforming the ‘non-dom’ tax system; applying VAT and business rates to private schools; closing the carried interest ‘loophole’; increasing stamp duty on purchases of residential property by non-UK residents by 1%; increasing and extending the Energy Profits Levy (windfall tax); and replacing the business rates tax system in England.

It’s widely expected that Ms Reeves will increase the rate of employer National Insurance contributions (which employers pay on their workers’ earnings). It’s also been reported that Ms Reeves may announce changes to capital gains tax (tax paid on money received from the sale or disposal of certain assets that have increased in value) and inheritance tax.

Another policy reportedly being considered by the government is an extension of the current freeze to income tax thresholds. This isn’t a direct increase to the income tax rates (as ruled out in Labour’s manifesto), and would not immediately affect how much income tax people pay (as under changes enacted by the previous government thresholds are already frozen until April 2028), but it would increase the overall amount of income tax people would pay compared to if thresholds increased in line with inflation from 2028/29.

Taxes on ‘working people’ vs taxes on work

Speaking on the BBC’s Today programme on 28 October, Chancellor of the Duchy of Lancaster Pat McFadden said: “When we talked about working people, we refer to the promises that we made in the manifesto around the taxes on wages that people pay, they won’t go up when the chancellor gets to her feet on Wednesday.”

Similarly, during an interview on the BBC’s Sunday with Laura Kuenssberg on 27 October, when asked about the phrase “working people” education secretary Bridget Phillipson said: “What I’m saying is that after the Budget when people look at their payslips, they will not see higher taxes.”

The two main taxes levied directly on earnings are income tax and National Insurance contributions.

An increase to employers National Insurance contributions would not directly increase the amount workers themselves are taxed on their earnings, as Mr Mcfadden and Ms Phillipson promised, but it’s been argued that doing so would break the party’s manifesto pledge, which said there would be no increase to National Insurance, without specifying whether this only applied to employee NICs.

If Labour were to extend the freeze to income tax thresholds, meanwhile, this would arguably not break the party’s manifesto commitment, which specified that the rates of income tax would not be increased, but clearly would result in people paying more income tax than they otherwise would have later in this parliament.

Changes in employer NICs and other taxes paid by businesses similarly would not impact the amount of personal tax paid by business owners, but would likely increase the cost of operating their businesses.

Other taxes, like capital gains tax and inheritance tax, are not levied directly on earnings, but may be paid on money received by people whose primary income is from earnings. 

Indirect taxes like fuel duty are also not levied on earnings, but increases in these taxes might be passed on to consumers in the form of higher prices.