UK Treasury chief admits business tax rise could lead to lower than anticipated wages

LONDON (AP) — U.K. Treasury chief Rachel Reeves conceded Thursday that wages may rise by less than previously thought as a direct result of her budget decision to increase a tax that businesses pay for their employees.

On Wednesday, Reeves raised taxes by around 40 billion pounds ($52 billion) to plug a hole she claims to have identified in the public finances and fund cash-starved public services, in a budget that could set the political tone for years to come.

The biggest single measure — worth some 25 billion pounds in five years — was an increase in the national insurance contributions employers pay in addition to the salaries of their workers. The levy, which was originally designed to pay for benefits and help fund the state-owned National Health Service but which is really absorbed into the overall tax take, will also be paid from a lower salary level.

Reeves admitted that the changes may prompt employers to pass on the additional financial burden by weighing down on wages.

“I recognize there will be consequences,” Reeves told the BBC. “It will mean that businesses will have to absorb some of this through profit and it is likely to mean that wage increases might be slightly less than they otherwise would have been.”

Her admission came as a widely respected British economic think tank warned that lower than anticipated wages may mean the tax raises more than thought, adding that Reeves may have to raise taxes again in coming years in order to support public services.

In its traditional day-after assessment of the budget, the Institute for Fiscal Studies said some of the projections looked “unrealistic,” particularly on public spending.

The IFS said the government will potentially need to raise up to another 9 billion pounds the year after next to avoid cutting spending in some departments.

Although day-to-day spending is set to rise rapidly after Wednesday’s Budget, increasing by 4.3% this year and 2.6% next year, it then slows down to just 1.3% per year from 2026.

IFS director Paul Johnson said keeping to a 1.3% increase will be “extremely challenging, to put it mildly.”

The center-left Labour party won a landslide election victory July 4 after promising to end years of turmoil and scandal under successive Conservative governments, get Britain’s economy growing and restore frayed public services. But the scale of the measures announced on Wednesday by Reeves exceeded Labour’s cautious general election campaign.

During the election, Labour said it would not raise taxes on “working people” — a loose term whose definition has been hotly debated in the media for weeks. Though Reeves did not increase taxes on income or sales, the Conservatives said hiking taxes on employers was a breach of Labour’s election promise and would lead to lower wages.

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves speak with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves speak with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves speak with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves speak with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

Britain's Prime Minister Keir Starmer and Chancellor Rachel Reeves speak with members of staff, during a visit to University Hospital Coventry and Warwickshire, in Coventry, England, Thursday, Oct. 31, 2024. (AP Photo/Darren Staples, pool)

NEW YORK (AP) — Thousands of nurses in three hospital systems in New York City went on strike Monday after negotiations through the weekend failed to yield breakthroughs in their contract disputes.

The strike was taking place at The Mount Sinai Hospital and two of its satellite campuses, with picket lines forming. The other affected hospitals are NewYork-Presbyterian and Montefiore Medical Center in the Bronx.

About 15,000 nurses are involved in the strike, according to New York State Nurses Association.

“After months of bargaining, management refused to make meaningful progress on core issues that nurses have been fighting for: safe staffing for patients, healthcare benefits for nurses, and workplace violence protections,” the union said in a statement issued Monday. “Management at the richest hospitals in New York City are threatening to discontinue or radically cut nurses’ health benefits.”

The strike, which comes during a severe flu season, could potentially force the hospitals to transfer patients, cancel procedures or divert ambulances. It could also put a strain on city hospitals not involved in the contract dispute, as patients avoid the medical centers hit by the strike.

The hospitals involved have been hiring temporary nurses to try and fill the labor gap during the walkout, and said in a statement during negotiations that they would “do whatever is necessary to minimize disruptions.” Montefiore posted a message assuring patients that appointments would be kept.

“NYSNA’s leaders continue to double down on their $3.6 billion in reckless demands, including nearly 40% wage increases, and their troubling proposals like demanding that a nurse not be terminated if found to be compromised by drugs or alcohol while on the job," Montefiore spokesperson Joe Solmonese said Monday after the strike had started. "We remain resolute in our commitment to providing safe and seamless care, regardless of how long the strike may last.”

New York-Presbyterian accused the union of staging a strike to “create disruption,” but said in a statement that it has taken steps to ensure patients receive the care they need.

"We’re ready to keep negotiating a fair and reasonable contract that reflects our respect for our nurses and the critical role they play, and also recognizes the challenging realities of today’s healthcare environment,” the statement said.

The work stoppage is occurring at multiple hospitals simultaneously, but each medical center is negotiating with the union independently. Several other hospitals across the city and in its suburbs reached deals in recent days to avert a possible strike.

The nurses’ demands vary by hospital, but the major issues include staffing levels and workplace safety. The union says hospitals have given nurses unmanageable workloads.

Nurses also want better security measures in the workplace, citing incidents like a an incident last week, when a man with a sharp object barricaded himself in a Brooklyn hospital room and was then killed by police.

The union also wants limitations on hospitals’ use of artificial intelligence.

The nonprofit hospitals involved in the negotiations say they’ve been working to improve staffing levels, but say the union’s demands overall are too costly.

Nurses voted to authorize the strike last month.

Both New York Gov. Kathy Hochul and Mayor Zohran Mamdani had expressed concern about the possibility of the strike. As the strike deadline neared, Mamdani urged both sides to keep negotiating and reach a deal that “both honors our nurses and keeps our hospitals open.”

“Our nurses kept this city alive through its hardest moments. Their value is not negotiable,” Mamdani said.

State Attorney General Letitia James voiced similar support, saying "nurses put their lives on the line every day to keep New Yorkers healthy. They should never be forced to choose between their own safety, their patients’ well-being, and a fair contract.”

The last major nursing strike in the city was only three years ago, in 2023. That work stoppage, at Mount Sinai and Montefiore, was short, lasting three days. It resulted in a deal raising pay 19% over three years at those hospitals.

It also led to promised staffing improvements, though the union and hospitals now disagree about how much progress has been made, or whether the hospitals are retreating from staffing guarantees.

Nurses strike outside Mount Sinai West Hospital, Monday, Jan. 12, 2026, in New York. (AP Photo/Yuki Iwamura)

Nurses strike outside Mount Sinai West Hospital, Monday, Jan. 12, 2026, in New York. (AP Photo/Yuki Iwamura)

Nurses strike outside Mount Sinai West Hospital, Monday, Jan. 12, 2026, in New York. (AP Photo/Yuki Iwamura)

Nurses strike outside Mount Sinai West Hospital, Monday, Jan. 12, 2026, in New York. (AP Photo/Yuki Iwamura)

FILE - A medical worker transports a patient at Mount Sinai Hospital, April 1, 2020, in New York. (AP Photo/Mary Altaffer, File)