The Government has said it wants to "boost businesses" after being asked if an increase in employers’ National Insurance Contributions (NICs) introduced by Rachel Reeves could be scrapped. The Prime Minister, Andy Burnham, has said it was the "wrong decision" and that Labour "got it wrong on small businesses” during the former Chancellor's tenure.
Prime Minister's criticism
Ms Reeves' decision to increase the amount employers pay has been heavily criticised, with business owners suggesting that it is an unneeded extra cost and companies are able to hire fewer people as a result. Mr Burnham said in an interview with the BBC earlier this year before entering Number 10: “I have said that I thought the weight of the burden on employers’ national insurance wasn’t the right decision. However, it was the decision.”
He added: “There is more that needs to be done to listen to the voice of small business, and as I’ve gone around this constituency, I’m hearing it a lot. People just feel they are at the kind of limits of what they can do.”
Treasury response
The Treasury has not ruled out scrapping Ms Reeves’ policy at the new Chancellor, John Healey’s first Budget on October 28. When asked if Mr Healey and the Prime Minister will revoke the increase to employer NICs, a spokesperson for the department said: “The Chancellor is fully focused on his priorities, to boost business, help with the cost of living and support people in every postcode.
“As has always been the case, the Chancellor will set out decisions at fiscal events, rather than routinely commenting on rumour, speculation or proposals.”
Government defence
The Government has insisted that it protected the smallest businesses from the increase in NICs by increasing the Employment Allowance from £5,000 to £10,500. At the time of the 2024 Budget, it estimated that 865,000 employers would pay no NICs at all, and more than half of all employers would either gain or see no change in 2025/26.
Announcing the date of the Budget in July, Mr Healey said: “This government is working fast to restore hope and back Britain’s communities. In the past two weeks, we have begun to kickstart growth in every postcode. We have backed British jobs, British skills and British businesses. And we have provided just a bit of breathing-space for those families and businesses that feel so squeezed, that feel without hope.”
He added: “This will be a Budget that moves money and power out of Westminster, and into every postcode around Britain. It will be built on fiscal discipline. It will meet our fiscal rules. It’ll give businesses and families some of the stability they need to plan for the future. Now, let’s get on with the job.”
