The Lead Untangles: Accusations of two-tier taxation over India trade deal
Keir Starmer has been accused of 'two-tier' taxation over the India trade agreement. But is this just low-hanging fruit for opponents or is it backed up by the facts?
Introducing The Lead Untangles: In an era where misinformation is actively and deliberately used by elected politicians and where advocates and opposers of beliefs state their point of view as fact, sometimes the most useful tool reporters have is to help readers make sense of the world.
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At a glance facts
The government has been accused of “two-tier” taxation over the terms of its trade deal with India.
While the deal focuses mainly on goods, certain policies such as those regarding national insurance contributions (NICs) and visas have caused much furore among politicians who know immigration in any form is a reasonably straightforward way to grab attention.
Part of that criticism is because, as part of the deal, some Indian and British workers will get exemptions on NICs - but that might not be as problematic as is being made out.
Context
Trade deals are a hot topic at the moment amid President Trump’s global tariff war and the latest striking of a deal between the UK and US. But the unpredictability of the Trump administration means securing deals with other countries becomes all the more important.
The India trade deal comes after years of talks. The UK will benefit from a reduction on tariffs on clothing and footwear, cars, food (including frozen prawns), jewellery and gems. Meanwhile, levies will fall on exports such as gin and whisky, aerospace, electricals and medical devices, cosmetics, higher value cars and some food (such as lamb). Vitally, the UK is keeping tariffs in place on some agricultural products such as milled rice, with a view of protecting British farmers.
When workers are seconded to either country on short-term visas, both they and their employers should be exempted from national insurance contributions for up to three years. They will make social security payments in their home country instead. This is known as a double contribution convention and is intended to stop workers temporarily seconded abroad from being taxed twice. It is a system that has been in place for some time, rather than a form of special treatment in this deal.
While the deal did not include any change to immigration policy, Reform UK leader Nigel Farage said the deal will “throw the doors open even wider” and make it cheaper to hire Indian workers over British ones
In response to the deal Conservative Party leader Kemi Badencoch called it a system of “two-tier taxes” and Reform UK leader Nigel Farage said that Britain’s workers had been “sold out”. Keir Starmer described criticism on this topic as “incoherent nonsense”.
The data shows that Britain granted more than 81,000 work visas to Indians in 2024 - more than any other nationality - but many of these were in health and care and they are expected to pay social security in the country.
This deal only applies to workers who are temporarily in the UK and workers will still have to pay the UK immigration health surcharge, meaning there will be no impact on the NHS.
The government also has similar reciprocal tax agreements with more than 50 countries, including the US and Canada. They are intended to stop workers from being taxed twice.
Farage also said that half a million Indians arrived in the UK over the past two years and that “this deal will throw the doors open even wider” and make it cheaper to hire Indian workers over British ones. However, the government did not concede to India’s demands to substantially increase visa numbers. The deal did not include any change in immigration policy, including towards Indian students studying in the UK.
As well as the NICs policy, one existing visa route — capped at 1,800 visas a year — for yoga instructors, musicians and chefs to come to the UK will be opened to Indian applicants, but they will need to meet the usual salary and skills requirements.
During talks last year, the Conservative Party hoped to see more benefits for the British service industry under the deal and, according to Labour, put visas on the table — which the current government managed to circumvent.
At the time, Indian officials also claimed that Badenoch agreed to exempt Indian workers from NICs despite her current criticisms. She has denounced this claim as “fake news”.
What the left is saying
Liberal Democrat deputy leader Daisy Cooper said the deal said risked "undercutting British workers at a time when they're already being hammered by Trump's trade war and Labour's misguided jobs tax".
Labour’s secretary of state for business and trade, John Reynolds said: “Our landmark agreement with India is the largest ever trade deal secured by the UK.
“This deal will help deliver our Plan for Change, putting more money in working people's pockets, boosting our economy and bolstering British business.”
What the right is saying
Shadow justice secretary Robert Jenrick said: “This trade deal means Indian workers here for less than 3 years will not pay National Insurance in the UK.
“Starmer has hiked National Insurance on Brits while giving an exemption to Indian migrants.
“British workers come last in Starmer’s Britain.
Ex-deputy PM Oliver Dowden said: “I remember firsthand Jonathan Reynolds’s commitment to the relationship from our cross-party delegation to India!
“Builds on significant progress made by previous Conservative government.
“Free trade is a win-win for both nations.”
What happens next?
All eyes are on Starmer as he aimed to deliver a trade deal with the US. Immediately, the US slashed tariffs on UK automotives a from 27.5% to 10%, with steel and aluminium reduced to zero.
Starmer praised Trump for the deal, saying "with this president and this prime minister we've managed to achieve what many people have tried to achieve for many years".
As the far right’s influence grows stronger, the Prime Minister will be forced to toe this line again and again. As trade deals with countries beyond the US become ever more important, right wing rhetoric that capitalises on the governments attempts to strike fair and decent pay deals, particularly with non-white countries, will certainly be amplified.
The government, which one could conclude has met criticism over immigration in particular by veering closer to Reform UK, will doubtless be watching the reaction to the trade deals closely.
About The Lead Untangles: In an era where misinformation is actively and deliberately used by elected politicians and where advocates and opposers of beliefs state their point of view as fact, sometimes the most useful tool reporters have is to help readers make sense of the world.
The Lead Untangles is delivered each Friday by The Lead and focuses on a different complex, divisive issue with each edition.
About the author: Ella is a freelance journalist specialising in worker's rights, housing, youth culture, social affairs and lifestyle. You can find her work in Tribune Magazine, Huck Magazine, Novara Media, VICE, Dazed, metro.co.uk and - most importantly - here at The Lead.