Businesses face rising costs amid national insurance increase
Businesses are incurring an annual cost exceeding £1,000 per worker due to the Chancellor’s decision to raise employers’ National Insurance, new figures reveal, reports BritPanorama.
Analysis by the Scottish Parliament Information Centre (SPICe) indicates that employers pay, on average, £890 extra in tax each year for workers on the real living wage (£26,228). This amount rises to £1,053 for those earning the Scottish median wage of £39,879.
The Scottish National Party (SNP), which commissioned the analysis, has urged Andy Burnham, expected to become prime minister later this month, to reverse the employers’ National Insurance rise.
Chancellor Rachel Reeves implemented this increase and lowered the tax’s starting threshold in 2024, following Labour’s landslide election victory. SNP MSP Laura Mitchell stated, “Andy Burnham must, as a priority, scrap the Labour Party’s national insurance tax hike, which has destroyed jobs and cost Scotland’s businesses huge sums of money.”
Mitchell criticized the policy as “incredibly short-sighted,” asserting that it has fostered a “high-cost, toxic environment” for businesses across Scotland and the UK, leading to job cuts, wage squeezes, reduced investment, and stunted economic growth. She claimed that the policy is costing businesses in Scotland about £1,000 per employee, contributing to rising unemployment and fewer job vacancies.
Furthermore, she emphasized that “Westminster policies have wiped billions of pounds from Scotland’s economy, causing unemployment and the cost of living to soar,” and asserted that Scotland requires the full powers of independence to build a stronger economy.
In March, Ms Reeves recognized a “valid argument” against her decision to increase employers’ National Insurance contributions, particularly in light of youth unemployment nearing one million. However, she defended the 2024 policy as essential for channeling funds into necessary public services.
Appearing before Parliament’s Treasury Committee, Ms Reeves remarked, “We did make the decision to increase national insurance in my first budget, and that’s because we needed to properly fund public services, including the National Health Service, which got a £29 billion-a-year uplift.”
She added, “Reducing waiting lists in the NHS is also good for business because it means that more people are available for work, and the workforce is healthier,” while acknowledging the particular issues surrounding youth unemployment.
A spokesperson for Burnham remarked that he is focused on delivering good growth across all areas, raising living standards, and addressing rising costs, reaffirming his commitment to the manifesto on tax.
