There is a fatal flaw in Chancellor Rachel Reeves’s plan to get people off benefits and into work. People can’t leave the ranks of the jobless if there are no jobs to go to.
Men and women on the frontline of the economy warn her tax plans will kill off employment. Repeatedly, she has been told that her hike in employers’ National Insurance contributions – which will come into force next month – will have devastating consequences.
People who go looking for an entry-level job in hospitality or retail in the coming months may be dismayed to discover that bosses are not taking anyone on. Kate Nicholls, of UK Hospitality recently warned of a “crisis of confidence” in the sector not seen since the days when “inflation was running at over 10%”.
Finding a job working behind a bar is set to become much more difficult. The trade body predicts the Chancellor’s changes mean employers will have to pay National Insurance for 774,000 workers for the first time at a cost of £1billion.
It would be one thing to drop a tax bomb like this if the economy was thriving but the OECD has just downgraded Britain’s growth forecasts to a miserable 1.4% and there are widespread fears of recession.
More than a third of companies plan to cut headcount, according to the Chartered Institute of Personnel and Development. And the Federation of Small Businesses found in the last quarter of 2024 confidence had hit its lowest point in a decade.
If the Chancellor is serious about boosting employment she should do everything she can to get Britain thriving. Rather than cranking up the costs of taking on staff, she should tear away obstacles.
A rapidly growing economy will do more to raise living standards than any Government initiative. But four out of 10 businesses told the CIPD they plan to increase prices, with a quarter scaling back or cancelling investment.
This is disastrous – and the situation could get much worse.
Of the 1.5million part-time jobs in retail, one in 10 could go in the next three years as a result of the rising cost of employment, according to the British Retail Consortium.
Labour wants to present itself as the party of workers, Britain’s greatest jobs champion. But decisions made in Downing Street threaten to wipe out jobs, force up prices and freeze wages.
The world has changed since the Chancellor’s mandarins dreamed up the “jobs tax”. A trade war is now erupting between the United States and many of the biggest economies.
If ever there was a time to think again, this is it.
