Starmer blasts 'incoherent nonsense' as critics slam India trade deal over tax breaks for foreign workers
7 May 2025, 14:51 | Updated: 7 May 2025, 14:56
Sir Keir Starmer has furiously defended Britain's "landmark" trade deal with India by claiming attacks on it were "incoherent nonsense", after critics said the agreement as "unfair" on workers.
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Nigel Farage insists the UK’s trade deal with India ‘discriminates against British workers’
The Prime Minister announced the landmark deal on Tuesday, which will mean dramatic tariff reductions on scotch whisky and car exports to India, while levies on aerospace, electricals and other food products will also fall.
Sir Keir hopes the deal will boost sectors hardest hit by Donald Trump's tariffs, but opposition party leaders have claimed it "discriminates against British workers".
The Conservative's Kemi Badenoch and Reform's Nigel Farage took to Prime Minister's questions on Wednesday to criticise the part of the deal that exempts some temporary Indian workers from national insurance payments.
Mr Farage had earlier pointed out to LBC's Nick Ferrari that British workers have had a tax hike, after Rachel Reeve's National Insurance Contributions and national minimum wage increase, while workers from India would be exempt from paying NI in the UK for three years.
Visibly infuriated in the Commons, the PM hit back and pushed Ms Badenoch on whether she was planning to "tear up" deals with 50 other countries in the argument over "double taxation".
Sir Keir explained to MPs that the move is under what is known as the “double contribution convention”, which is designed to stop workers and employers paying the NI tax twice, once in each country.
UK and India agree trade deal
Describing the deal as a "huge win for working people in the country”, Mr Starmer said: “Because of the work that we have done, we are a country that countries like India want to do deals with, because of the messages and the work that we have done.”
Under the terms of the agreement, which is subject to a vote by MPs, staff working for an Indian company who transferred to the UK for less than three years would pay into the Indian social security system rather than paying into both British and Indian systems as they do now.
"This undercuts British workers," Mr Farage told Nick Ferrari at Breakfast.
"We are discriminating against British workers through the tax system, a two tier tax system for big employers and for individual employees. It is scandalous beyond belief," he said.
"The bloke running your local pub has just had a massive tax hike for all the staff that work for it."
Mr Farage added: "I cannot believe the sheer stupidity of this Labour government."
UK consumers are also expected to benefit from tariffs being reduced on some Indian goods such as clothing imported to the country.
Ministers said the deal would boost GDP by £4.8 billion within 15 years
On Wednesday, business secretary Jonathan Reynolds told LBC the claims the deal if unfair were "absolute nonsense"
It's a "smasher of a deal", he said.
"It's worth in value around 5 billion pounds this year and every year over time it means higher wages, it means more jobs, it of course means more exports."
Mr Reynolds pointed to similar deals with 50 other countries, including the EU, the US, Canada and Japan, saying that the previous Conservative government signed a similar deal exempting Chilean workers from national insurance for five years.
UK workers temporarily in India would remain subject to national insurance, but be exempt from Indian social security levies.
LBC callers are divided over the UK-India trade deal
Seconding Indian staff to the UK will also involve additional costs such as the immigration health surcharge and relocation costs, Mr Reynolds said.
He added that the overall impact of the deal would mean more tax revenue for the Treasury, and said he expected more UK workers to be seconded to India as a result of British companies gaining access to Indian government procurement contracts.
This is not a tangible issue. This is the Conservatives – and Reform – unable to accept that this Labour Government has done what they couldn’t do and get this deal across the line," he told Sky News.
Mr Reynolds also dismissed reports that the Home Office had not been informed about the terms of the deal until shortly before it was announced, saying it was “absolute nonsense reporting”.
The deal includes some easing of rules on “business mobility” for temporary visitors and up to 1,800 chefs, yoga instructors and musicians providing contracted services.
But the Government has insisted it will involve “no impact” on the immigration system or immigration numbers.
The deal, which has lowered tariffs on UK exports including whiskey, gin and cars as well as imports of clothing from India, is estimated to add “£4.8 billion to GDP per year” from 2040.
But the Tories have seized on the national insurance contribution (NICs) exemptions, known as a double contributions convention, as an example of what they claimed was “two-tier taxes” under the Labour Government.
Shadow business minister Dame Harriett Baldwin told MPs the arrangement would be “subsidising Indian labour while undercutting British workers”.
“A double contribution convention will come at a significant cost to the British taxpayer and to British businesses,” she told the Commons on Tuesday.
Despite the criticism, some business leaders praised the deal after it was announced.
And Cabinet minister Douglas Alexander pointed out that the agreement was reciprocal, and limited.
He said: "India is going to be one of the world's largest middle-classes in the coming decades. The agreement will only cover a very specific and limited group of Indian business people for a period of three years.
"There are other arrangements in place by the Indians that extend longer than that, that's worth recognising and the workers will be required to pay their immigration health surcharge to the National Health Service. This therefore does not affect NHS funding."
