Prime Minister Andy Burnham is facing pressure to reverse a National Insurance tax rise for employers, which business bosses say has directly caused more than 160,000 UK jobs to disappear. The new Labour leader is weeks away from overseeing his first Budget with new Chancellor John Healey, in which he will confirm the delivery of several Rachel Reeves policies, such as the cut to Cash ISAs and the introduction of a special tax exemption for state pensioners.
London Chamber of Commerce submits Budget proposals
Ahead of the Budget, the Government has invited submissions from key organisations and sector leaders. One submission, from the London Chamber of Commerce, has lobbied Mr Burnham's Government to reverse the National Insurance tax rise announced for employers in 2024 as part of Rachel Reeves' first Budget and implemented the following April.
In the 2024 Autumn Budget, now-ex-Chancellor Rachel Reeves announced the rate of employers' NICs would be increased from 13.8% to 15%, starting from April 6, 2025. The level at which employers start paying NICs (the secondary threshold) was also reduced from £9,100 to £5,000 per year, bringing more staff into liability for tax costs. The change meant that employers' NICs for minimum wage employees rose from £1,617 to £2,583, according to the Centre for Policy Studies.
Call to reverse the rise
At the time, Ms Reeves' changes were considered by some to be breaking a Labour manifesto promise not to raise National Insurance, but the former Chancellor argued that she had skirted around the pledge by raising the tax on employers' contributions, and not directly on workers' contributions themselves.
Now, the London Chamber of Commerce has urged Mr Burnham to reverse Reeves' policy, citing the damage done to the UK's job market since. It said as part of its Budget submissions to Government: "Reverse the 2025 increase in employer National Insurance contributions, which directly increased costs for businesses and consumers, making it harder to deliver growth and removing entry-level jobs."
The rise functioned as a direct tax on employment, levied not on profit but on the act of hiring itself. The evidence that it has harmed job creation is clear: employee jobs fell by 167,000 between October 2024 and April 2025, a fall outpacing the OBR's own expectation that the measure would only reduce labour supply by around 50,000.
Impact on young people and NEETs
The Chamber continued: "For a business weighing up taking on an extra pair of hands, or taking a chance on a young person who has been NEET, this extra cost has resulted in that role not being filled. Entry-level and part-time roles have clearly been affected, directly feeding the national NEET crisis the Government is trying to tackle. Reversing it is the clearest signal the Chancellor could send that this is a Government that wants employers to hire, and it is the most effective measure the Government could take to meaningfully lower the cost of hiring. If this successfully helps to reduce the number of those who are NEET, it also presents a reduction in the cost of the welfare bill."
"In our exclusive polling, 74% of those business leaders surveyed said reversing the National Insurance increase would have a positive impact, with 56% more likely to invest if the increase was reversed." Elsewhere in its proposals, the Chamber also urged Mr Burnham's Government to entirely scrap NICs when hiring young people who have been out of work for a long time.
It added: "A young person who has been out of education, employment or training for a year or more is precisely the candidate an employer is most reluctant to take a chance on, because the perceived risk and training cost are highest, and every month out of work makes the next job harder to get."
"That, combined with the forthcoming Employment Rights Act, risks making the hiring of a young person who has been NEET unviable for many businesses, especially SMEs. Removing employer NICs entirely for hiring these young people up to the age of 25 directly lowers the cost of taking that chance, tilting the marginal hiring decision towards giving them a start. It targets public support at the exact group whose exclusion from work carries the highest long term social and fiscal cost, and it pays for itself many times over if it moves a young person from a lifetime using the welfare system to a lifetime in employment."
