Reeves’s NI tax raid ‘will undermine fight against worklessness’

Rachel Reeves
Major companies have told Chancellor Rachel Reeves that jobs cuts are ‘inevitable’ as a result of her tax rises - ISABEL INFANTES/AFP

Business leaders have warned the Government that its National Insurance raid will undermine the fight against worklessness by harming job creation.

Alison McGovern, the employment minister, was warned during a private call with employers’ lobby groups on Thursday that a pledge to get Britain’s employment rate to an unprecedented 80pc would be held back by the Government’s tax raid.

“Normally, we would be sitting here ready, willing and able to help the 80pc employment target but the message [on the call] was that recruitment is now much more challenging with a National Insurance regime that penalises hiring,” one source said.

“The Government is pulling in two directions. The extra National Insurance means I can’t employ two part-time apprentices next year.”

Businesses have been fighting back against Rachel Reeves’s £25bn increase in employer National Insurance contributions, which will kick in from next spring. Major companies including Tesco, M&S and Boots told the Chancellor this week that job cuts were “inevitable” as a result of the significant extra tax burden.

Those warnings come as the Government fights to get more people into work. Ms McGovern’s call with business groups was organised to discuss the Government’s Get Britain Working white paper, which is due to be published next week.

The paper will outline steps to achieve an employment rate of 80pc – up from its current level of 74.8pc – and get more young people into work. The number of young people who are not in employment, education or training (Neets) climbed to 946,000 in the three months to September, according to the Office for National Statistics.

A source on the call with Ms McGovern said the discussion centred on how job centres “can be better integrated with employers and what can be done to tackle the Neets”. Business leaders urged ministers to reform job centres to ensure they “look at careers rather than just pushing people into any job”.

The Government’s plans will reportedly include stripping young people of their benefits if they are not in some form of education, employment or training.

Economic inactivity in the UK has risen by 900,000 since 2020, with 85pc of this increase caused by long-term sickness, the NHS Confederation and the Boston Consulting Group have said.

More than 30pc of economically inactive people are long-term sick. Musculoskeletal problems are pushing older Britons out of work, while the younger generation are suffering with mental health problems.

The Government was contacted for comment.