UK employers have warned that a rise in employer national insurance contributions in the Budget could hit jobs, limit pay rises and hit businesses such as pubs, hotels and restaurants.
Keir Starmer and Chancellor Rachel Reeves will introduce employer contributions in their Budget on October 30, as part of plans to plug what the government claims is a £22bn hole in the public finances left by the previous Conservative Party. refused to rule out the possibility of an increase. government.
The head of British Hospitality, which represents bars, pubs, restaurants and hotels, said such a move would result in a tax on jobs.
Kate Nicholls, the group's chief executive, said: “The increase will particularly hit sectors such as hospitality, where staff costs are the biggest business expense.”
“Hospitality companies are already managing increases in other areas such as wages, food and beverage, and energy, so it will be much harder for them to withstand further cost increases.”
Mr Starmer on Tuesday twice refused to rule out an increase in employer national insurance contributions in the Budget, stressing that Labor's manifesto pledge was not to raise taxes on working people.
His words came as Chancellor Rachel Reeves gave a strong signal on Monday that a rate hike was on the horizon at the end of October, suggesting senior government officials would understand the need for such a decision. It was held inside.
In an interview with the BBC from Downing Street, the Prime Minister cited income tax and national insurance, saying Labor was “making it clear in our manifesto that we will not raise taxes on working people”. “It wasn't just about the manifesto. As we said repeatedly during the election campaign, we intend to keep the promises we made in the manifesto.
“Of course it's going to be a tight budget, but the focus is on rebuilding our country and ensuring the growth our economy needs. And that coincides with [investment] Yesterday's summit and this money coming in will be a real game changer. ”
Institute for Fiscal Studies director Paul Johnson told Times Radio on Monday that increasing employer national insurance contributions was a “clear breach” of the manifesto. “When I read the manifesto again, it clearly says there will be no increase in national insurance contributions,” he said.
The potential measures have also been criticized by Layne Newton-Smith, chairman of the Confederation of British Industry, who said on BBC Radio 4's Today program that “businesses need to create jobs and growth” to fund public services. It may become more difficult to do so.”
The British Chambers of Commerce, which primarily represents small and medium-sized businesses, is also concerned. Businesses are already facing rising costs from the new administration's planned employment reforms, said Jane Gratton, deputy director of public policy.
Introducing national insurance for employer pension contributions could raise up to £17 billion a year for the Treasury, while a 1p rise in regular employer national insurance could raise around £8.5 billion.
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Government figures released on Tuesday showed signs of a weakening UK jobs market as wage growth slowed.
Rob Morgan, chief investment analyst at wealth manager Charles Stanley, said higher employer contributions could dampen wage growth as executives seek to limit the impact of rising labor costs. He said there is.
“With inflation still not fully subdued, there could be further pressure on the cost of living for working households,” he said.
“However, the impact is not clear-cut. Employers consider the total cost of the employee, including the employer's NIC and pension contributions. If these increase, it may lead to restrictions on new hires by the company, restrictions on salary rises, or reduce pension payments. However, some may try to pass these costs on to higher prices.”
Tom Selby, head of public policy at pensions firm AJ Bell, said: “Politically, this may be less risky as it doesn't directly hit voters' pockets, but if an employer cuts compensation such as There's a risk that it will, but it's a pension,'' Mr Selby said.
Mr Reeves and Keir Starmer promised voters before July's election that they would not increase key tax rates on working people, specifically income tax, value added tax and national insurance.
However, the Conservative Party argues that increasing employers' national insurance contributions is tantamount to breaking their manifesto commitments.
