United Kingdom's Jonathan Reynolds expresses support for UK-India trade agreement amid Conservative Party's tax criticism
Loose Cannon's Take:
As the UK and India gear up for final negotiations on a mind-blowing free trade agreement (FTA), trade whiz Jonathan Reynolds has stuck his neck out, backing the pact – despite a tsunami of Conservative flak over parts related to worker migration and taxes.
This UK-India FTA, signed off in principle back in May 2025, is set to be India's mega trade deal, with experts predicting a £4.8bn boost to the UK's GDP and a whopping £25.5bn increase in bilateral trade by 2030.
The deal also boasts a double contributions convention (DCC) designed to nuke the double social security taxation on temporary workers shuffling between the two countries – a move aimed at streamlining business operations but one that's caused quite a political storm.
At the India Global Forum on June 18, Reynolds reiterated the UK government's commitment to seal the deal. "This is a golden opportunity to show that the UK is dead serious about beefing up our economic ties with India and closing a major free trade agreement," Reynolds said at the event.
Reynolds is insistent on momentum and getting this deal done, noting, "What we're shooting for with this visit is momentum, pace, and getting it done." It's worth mentioning that bilateral trade between the UK and India grew to $21.34bn in 2023-24, and the deal's focus is to double that to $120bn within five years.
However, the deal's lengths on worker mobility, especially the clause exempting some Indian workers seconded to the UK from National Insurance contributions, have drawn fire from the Tory party. The complainants claim this leading to a "two-tier tax system" that threatens to undermine British workers.
Reynolds shot down those claims today, stating, "Let me be clear: I'd never tolerate British workers being undercut through any trade agreement we'd ink." He went on to explain that the clause falls in line with international norms to avoid double social security taxation – a practice that's already on the table with over 50 countries, including the US and Canada.
The exemption is reciprocal, hitting only specific skilled workers with visa caps and existing routes, and applying equally to British workers posted to India. Nevertheless, Tory bigwigs have kept up the noise. Former trade secretary Kemi Badenoch revealed she had refused to approve a similar deal during her stint, while Nigel Farage slammed the announcement as an attempt by the Labour government to "bury" the deal post-local elections.
This political pushback underscores the tricky tightrope the UK government must walk to secure a trade deal that aims to reset Britain's post-Brexit global trading relationships, despite being rife with domestic political risk.
Reynolds: A defining moment for UK trade
Reynolds insisted the deal's potential benefits for both economies outweigh the drama. "I truly believe this deal will result in an incredibly positive outcome for both countries. I think it's a massive moment in Britain's trading relationships," he said.
As the UK government finalizes the deal, the outcome will impact economic ties with one of the world's fastest-growing markets and signal the government's ability to navigate trade in a post-Brexit era. Stay tuned!
Enrichment Data
Key Provisions and Highlights:
- The deal facilitates cross-border labor mobility through social security coordination and temporary worker tax relief.
- Tariff reductions are sector-specific, benefiting sectors such as IT services, textiles, and automobile imports.
- The deal aims to stimulate trade growth, but controversy surrounds limited visa liberalization, the temporary nature of work permits, unresolved climate-related tariff issues, and questions about the practical impact on smaller firms.
[1] Double Contribution Convention (DCC) ensures that temporary workers moving between the UK and India pay social security contributions only in their home country, avoiding double taxation.[2] The deal includes streamlined visa and work permit procedures but has not significantly expanded UK business visa quotas.[3] The agreement opens up the Indian government procurement market to UK businesses under "Make in India" rules.[4] Controversy revolves around the Carbon Border Adjustment Mechanism (CBAM), climate-related tariffs on imports from countries with less stringent environmental regulations, and India's concern about potential future trade tensions.[5] Tariff reductions are sector-specific, providing better access for Indian textile exports to the UK and reducing UK automobile and whisky tariffs into India, among others.
- The UK-India free trade agreement (FTA) has sparked conversations in the realm of politics, as it could impact the insurance and finance sectors of both countries significantly.
- The finalization of this trade deal could have far-reaching implications for businesses in both the UK and India, particularly those in sectors such as IT services, textiles, and automobiles.
- The politics surrounding the UK-India FTA also extends to the world of general news, with ongoing discussions about issues like worker migration, taxes, and climate-related tariffs that could shape the future of global business relations.
