Sir Keir Starmer faced a furious backlash today after it emerged he is handing Indian workers in the UK and their employers a major tax exemption to secure a trade deal.

Delhi revealed that the terms mean Indian nationals on temporary visas and their firms will not have to pay ‘social security contributions’ for three years.

The agreement, which has been three years in the making, will see the UK lower tariffs on clothes, shoes and food from the subcontinent, in exchange for reciprocal cuts for products including whisky and cars.

But the tax break – which was omitted from the UK release on the pact – immediately provoked anger. 

It comes as UK firms have been hit with a rise in national insurance contributions (NICS) that many warn will force them to slash jobs or even shut down.

Tory frontbencher Robert Jenrick said: ‘British workers come last in Starmer’s Britain.’ 

Last month the rate of employer NICS went up by 1.2 percentage points from 13.8 per cent to 15 per cent, despite calls for a U-turn at a time of poor economic growth.

The tax break was not mentioned by Downing Street in its announcement today. But a statement by the Indian government said it would ‘lead to significant financial gains for the Indian service providers and enhance their competitiveness in the UK market that would create new job opportunities as well as benefit large number of Indians working in the UK’.  

Sir Keir and Mr Modi met at the G20 last November. More than a dozen rounds of talks involving successive governments have taken place since 2022 with the aim of securing a trade pact with India, which is forecast to become the world’s third largest economy.

India’s Prime Minister Narendra Modi said his country had concluded an ‘ambitious and mutually beneficial’ free trade agreement.

Tory frontbencher Robert Jenrick said: ‘British workers come last in Starmer’s Britain.’

Questions also remain over what agreement has been made on other visas for Indian nationals wanting to study or work in the UK.

That was a key sticking point that held up talks under the previous Conservative Government and Labour. 

Sir Keir said there were ‘tough negotiations on both sides’ over the issue of visas.

He also promised the trade deal with India included ‘the best set of arrangements’ to safeguard key British industrial sectors.

The PM will visit India ‘at the earliest opportunity’, Downing Street said following a call between the him and Indian counterpart Narendra Modi.

Sir Keir said the deal would ‘grow the economy and deliver for British people and business’, and Mr Modi said it was ‘ambitious and mutually beneficial’.

In a post on X, he said: ‘Delighted to speak with my friend PM Keir Starmer. In a historic milestone, India and the UK have successfully concluded an ambitious and mutually beneficial free trade agreement, along with a double contribution convention.

‘These landmark agreements will further deepen our comprehensive strategic partnership, and catalyse trade, investment, growth, job creation, and innovation in both our economies. I look forward to welcoming PM Starmer to India soon.’

The deal announced this afternoon 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. 

However, the issue of the tax break is likely to dominate. 

Grim figures showed this morning that the UK’s powerhouse services sector has slipped into the red for the first time in 18 months – with the NICs increase blamed alongside Trump’s trade war.

The closely-watched PMI survey of businesses showed a score of 49 for April – with anything below 50 representing contraction.

That was down from 52.5 in March and in negative territory for the first time since October 2023. 

Firms reported that the NICs raid and increases in the national minimum wage heaped pressure on costs. 

Business and Trade Secretary Jonathan Reynolds welcomed Indian Minister of Commerce and Industry Piyush Goyal to London for trade talks this week to seal the terms. 

More than a dozen rounds of talks involving successive governments have taken place since 2022 with the aim of securing a trade pact with India, which is forecast to become the world’s third largest economy. 

Key sticking points had included high tariffs on Scotch whisky in India and visa rules for Indian students and professionals.

Grim figures from the closely-watched PMI survey of businesses showed a score of 49 for April – with anything below 50 representing contraction

Business and Trade Secretary, Jonathan Reynolds welcomed Indian Minister of Commerce and Industry, Piyush Goyal to London for trade talks this week.

Tory shadow trade secretary Andrew Griffith said: ‘It’s good to see the Government recognise that reducing cost and burdens on businesses in international trade is a good thing, and that thanks to Brexit we can do.

‘But it would be even better if they would apply the same reasoning to our domestic economy, where they remain intent on raising taxes, energy costs and regulatory burdens.’

But Rain Newton-Smith, chief executive of the Confederation of British Industry (CBI), said the UK’s trade deal with India was a ‘beacon of hope amidst the spectre of protectionism’.

She said: ‘India is one of the UK’s most important and longstanding partners given our significant trading relationship and rich history.

‘The CBI has always been highly supportive of efforts to sign a comprehensive trade deal with India, with businesses seeing myriad opportunities in the Indian market.

‘In its mission for growth, it is right that the Government seeks to strengthen and expand the UK’s trading relationships with partners around the world.

‘Today’s announcement is a beacon of hope amidst the spectre of protectionism: free and fair trade will always be critical for kickstarting growth and boosting productivity.

‘The UK Government should be commended for its commitment to delivering a trade deal which safeguards our national interests, protects high standards, and delivers market access for UK firms.