National Insurance rise would hit job creation, firms warn

Businesses have hit out over a potential rise in National Insurance paid by employers, arguing it will make hiring staff and creating new jobs harder.

Leading business groups in the UK raised concerns over the potential tax rise – something Prime Minister Sir Keir Starmer failed to rule out in an interview with the BBC on Tuesday.

Some have warned that a hike in National Insurance on employers would “hobble” economic growth, while one lobby group claimed it would “hammer” the hospitality sector.

Labour has said that it is “pro-business” and wants to boost economic growth but Sir Keir has cautioned that the Budget on 30 October is “going to be tough”.

The CBI, one of the UK’s leading lobby groups which claims it speaks for 170,000 firms, suggested companies have stalled taking on new workers and investing as they await the government’s tax and spending plans.

Rain Newton-Smith, chief executive of the CBI, told the BBC’s Today programme that employers would see a National Insurance rise as a “difficult move” which would “increase the cost of taking someone on”.

This is on top of “big increases” in the National Living Wage in recent years.

Kate Nicholls, chief executive of UK Hospitality, said any rise in National Insurance would “particularly hammer sectors like hospitality, where staffing costs are the biggest business expense”.

Alex Veitch, director of policy at the British Chambers of Commerce, conceded that the government had to make “difficult decisions” in the Budget, but he warned that raising employer National Insurance contributions would “simply hobble growth and lead to businesses having less money to invest in their staff”.

Some questioned whether Labour had reneged on its manifesto pledge not to raise taxes including National Insurance.

On Monday, Chancellor Rachel Reeves said Labour’s election pledge not to increase National Insurance on “working people” related to the employee element, as opposed to the sum paid by companies.

“Firms are run by working people,” said Veitch. “Nearly all UK companies are small, with many family-owned, and they are the anchors in our local economies.”

Craig Beaumont, executive director at the Federation of Small Businesses, said: “You don’t get to a pro-small business Budget without the government honouring its cast-iron manifesto commitment to not increase National Insurance contributions, including on small employers.”

He added a rise in National Insurance would “make every job in all our local communities more expensive to maintain”.

Speculation is gathering about what Labour will announce in its first Budget for 15 years at the end of this month.

The chancellor claims there is a £22bn “hole” in the public finances and that some taxes will be raised.

National Insurance is paid by employers, up to 13.8% on the earnings of their staff above £175 per week.

Separately, the government could decide to introduce a National Insurance levy on the pension contributions employers pay. Currently, this is tax free.

Veitch said that any tax rises should be “countered” by steps to incentivise investment, especially for smaller companies.