Chancellor Rachel Reeves, who appeared at the Great Northern Conference in Hull yesterday, admitted it won’t be “easy for businesses” to face the increase in employers’ national insurance.
The Chancellor extended business rates relief for the retail sector after promising to “fix the foundations” of the economy and repair the public finances in the Autumn Budget. In the same breath, she confirmed a £25 billion raid on employers’ national insurance contributions, with higher rates and a lower starting threshold.
The rate will increase by 1.2 % to 15% from April 2025, with payments starting when an employee earns £5,000, down from the current £9,100.
At yesterday’s conference, the Chancellor said: “I’m not going to pretend that it’s going to be easy for businesses, or indeed for charities or local authorities, to absorb, especially, the national insurance increase.
“But we made a commitment during the general election…that we wouldn’t increase taxes on working people, because over the last few years it has been working people that have had to bear the brunt of tax increases.”
Reeves cited Labour’s election campaign promise to not increase income tax, VAT or national insurance on employees, saying the party had “managed to stick to that manifesto commitment”.
Conservatives argued that Labour breached its manifesto pledge by not specifying between employee and employer contributions.
She was also pressured to repeat the pledge she gave to the Confederation of British Industry in November, promising there would not be a repeat of the £40 billion tax hikes she announced in her first budget.
Following Reeves’s appearance in Hull, Shadow Chancellor Mel Stride asked whether Downing Street has “changed its mind”, or if Reeves “spoke without thinking” when she told business chiefs she would not repeat her Budget hikes.
Treasury Chief Secretary Richard Fuller added that the chancellor was “again undermining business confidence”.
Fuller said: “She told the CBI, last week, there would be no more borrowing and no more taxes. Days later, the business secretary and then the prime minister refused to stand by what she said. Now even she cannot repeat her own words.
“How can businesses be expected to create jobs, growth and wealth in the economy when the government offers neither stability or credibility.”
