Rachel Reeves has been accused of betraying businesses after Barclays warned that her increase in employer national insurance contributions (NICs) will harm workers’ living standards. The bank’s economists said the policy will lead to lower real incomes as companies pass on costs through reduced pay rises and higher prices.
The chancellor raised employer NICs from 13.8% to 15% and cut the threshold from £9,100 to £5,000 per year, a move expected to raise over £25bn. Despite Labour’s manifesto pledge not to increase taxes on working people, Reeves argued the change does not breach the commitment as it does not appear on payslips.
Business groups have described the Budget as “anti-growth” and warned of job losses, wage depression, and underinvestment. John Longworth of the Independent Business Network said the Budget “betrays” the nation, while the Institute of Directors called the NICs hike a “major blow” that takes no account of profitability.
Hospitality bosses also criticised the policy as regressive for lower earners. Alex Veitch of the British Chambers of Commerce noted that combined with a 6% rise in the national living wage, some firms face a sevenfold increase in costs, forcing them to reassess investment and hiring plans.
Reeves defended the tax rises, part of £40bn in increases to fix a £22bn “black hole” in public finances, but admitted they would impact wage growth. Green energy tycoon Dale Vince, a Labour donor, suggested a 2% wealth tax as an alternative to raise funds for public services.
