The CBI has urged John Healey to raise the earnings threshold at which employers start paying national insurance contributions (NICs) from £5,000 to £6,000, claiming the change would create 41,000 jobs, mostly for young and entry-level staff.
In a submission to the Treasury ahead of the Budget on 28 October, Britain’s biggest business lobby group said the move should form part of a near-£4bn tax cut for the private sector. It would partially reverse the £25bn rise in employer NICs announced by Rachel Reeves in her first Budget two years ago.
The CBI calculates that lifting the secondary threshold, which covers the bulk of employees, would cost the Treasury up to £3.9bn a year, offset by a £3.4bn boost to growth and an extra £800m in tax revenues from higher employment.
Reeves raised the main employer rate to 15 per cent and cut the secondary threshold from £9,100 to £5,000, with the changes taking effect in April 2025. The rise has been criticised for making young people too costly to employ, with retail, leisure and hospitality, which employ more younger workers, among the sectors most affected.
With youth unemployment at a 12-year high, Healey and the prime minister, Andy Burnham, face growing calls to cut the cost of hiring young people as the number of young people not in education, employment or training (Neets) rises.
Rain Newton-Smith, chief executive of the CBI, said: “With fiscal headroom in short supply, every decision should be judged by whether it strengthens the foundations for long-term growth. Business costs ultimately become household costs, so adding further pressure to businesses already facing significant cost pressures would make that task harder.”
The CBI also called for a full overhaul of business rates rather than “piecemeal” cuts for sectors such as pubs and gig venues. Healey is reported to be considering raising the small business rates relief threshold at the Budget.
“This budget should cut the costs holding firms back, simplify the tax system and make it easier to get investment moving,” Newton-Smith added. “Get those conditions right and businesses will respond with more jobs, more investment and stronger growth across the country.”
Family Business UK has separately asked the Treasury for a six-month employer NICs holiday for family businesses recruiting people aged 18 to 24, or up to 30 for those entering their first job, which it estimates would support 100,000 recruits. The group says family businesses make up 93 per cent of UK private sector firms.
It also wants more wage support for apprentices in retail, hospitality and education, and warned that without a practical package to ease recruitment, its members could not help manage rising Neet numbers.
Neil Davy, chief executive of Family Business UK, said: “Family businesses want to invest, grow and create good, long-term jobs. But rising employment costs are making it harder for firms to take on staff, just when the country needs businesses to create more opportunities for young people.”
Its other proposals include ruling out a wealth tax, reconsidering the inheritance tax threshold, 100 per cent business property relief regardless of value and a more progressive business rates system. In its survey, 43 per cent of family-owned businesses named business rates as the tax with the greatest impact on their operations.
The Conservatives have pledged to cut NICs rates for young people if they win the next general election. James Reed, boss of the recruiter Reed, has suggested taxing AI and automated services more heavily to cut the tax cost of employing younger workers. Retail bosses were due to warn Healey about employment taxes at a Downing Street summit on Tuesday.
Healey is expected to fund all Budget measures through tax rises or spending cuts rather than borrowing. He and Burnham have said they want to bring down the cost of living and the “cost of business”.
A Treasury spokesperson said giving businesses “the breathing space to invest, grow and deal with cost pressures is our priority”, citing business rates cuts, a cap on corporation tax and a £4bn access-to-finance boost for SMEs. The spokesperson added that tax decisions were a matter for the Chancellor to set out at fiscal events.
