Plans to hike up taxes up on employers will go before Parliament on Tuesday
Don’t push up prices, warn economic experts (Image: Shutterstock / Dusan Petkovic)
EXPERTS have called on the Labour Government to step back from an “assault on business” which they warn will lead to higher prices, lower wages and fewer jobs.
Chancellor Rachel Reeves’s plans to hike up National Insurance contributions on employers will go before MPs on Tuesday and leading voices are calling for an urgent u-turn.
Maxwell Marlow of the Adam Smith Institute condemned the changes as a “jobs tax” and warned if these go ahead the country will see the “price of products rise at the till, slower wage growth to pay for them and a tougher job market”.
Alex Veitch of the British Chambers of Commerce claimed some small to medium-sized businesses are “looking at seven-fold increases in their bills for NICs and wages”.
He said: “The firms we represent have been left scratching their heads to see how growth will be possible if their costs are rising.”
And Tom Clougherty of the Institute of Economic Affairs said that the UK faces nothing less than “an assault on business – something that Britain’s stuttering economy can ill afford”.
He said: “Raising employers’ National Insurance Contributions will cost jobs, reduce wages, and eliminate opportunities. This should not be a surprise: if you tax something, you get less of it.”
Under the plans, which are predicted to raise nearly £24billion in 2025-26, the point at which employers start paying National Insurance Contributions on employees’ earnings goes down from £9,100 to £5,000 – with the rate going up from 13.8 per cent to 15 per cent.
Daniel Herring of the Centre for Policy Studies said the lowering of the threshold would “disproportionately affect low paid workers”.
Rain Newton-Smith, chief executive of the CBI, warned this and other hike in costs “will increase the burden on business and hit their ability to invest, ultimately making it more expensive to hire people or give pay rises”.
A Treasury spokesman defended the tax hike, saying: “With our public services crumbling and an inherited £22billion fiscal black hole, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability. By doing this, more than half of employers will either see a cut or no change in their national insurance bills, there will be £22.6billion more for the NHS and workers’ payslips will be protected from higher tax.
“We are also permanently cutting business rates for retail, hospitality and leisure from 2026 for the first time, and have capped corporation tax at 25 per cent. Working together with business we’re determined to unlock the growth opportunities of our country for the future.”
The Government argues that the smallest businesses will be protected from the increase because the “employment allowance” will go up from £5,000 to £10,500 – meaning 865,000 employers will pay no contributions at all next year.
But Darwin Friend of the TaxPayers’ Alliance warned that “hiking the jobs” will “devastate the British economy”.
He said: “Rachel Reeves should reverse course and stop this shocking tax grab from British businesses.”
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