The chancellor has admitted it will not be “easy” for businesses to “absorb” the increase in employers’ national insurance contributions that was announced in the budget.
Rachel Reeves also acknowledged that the change – which will see employers’ contributions rise to 15% from April 2025 – would also hit charities and local councils.
Speaking at The Yorkshire Post’s great northern conference in Hull, 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.”
Ms Reeves cited Labour’s election campaign promise not to increase income tax, VAT or national insurance on employees, saying the party had “managed to stick to that manifesto commitment”.
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However, the Conservatives have argued that Labour did breach its manifesto pledge because it did not specify between employee and employer contributions.
“That has meant we have had to increase taxes, particularly national insurance, but also some of the taxes on the wealthiest in society,” she said.
On Monday celebrity chef Tom Kerridge warned that the national insurance hike could lead to a “huge amount” of restaurant closures.
Mr Kerridge was one of a number of business figures to endorse Labour during the general election.
But speaking to the Politics Hub with Sophy Ridge last night, Mr Kerridge said he believed the change will cost around £800-£850 more per employee per year for businesses like his.
“There will be a huge amount of closures,” he warned.
“We’ve already got high-profile names and Michelin-star restaurants that have decided to shut their doors.
“And when that starts to happen, it does begin to filter down.”
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The chancellor also stopped short of ruling out further tax rises in the coming years – a promise she made at the Confederation of British Industry’s annual conference last Monday.
She told reporters in Hull: “I have now set the envelope for government spending for the next few years so I’m not going to need to come back and top that up, either with more borrowing or more taxes.
“Now, I can’t write five years’ worth of budgets in just five months – we don’t know what might happen in the future in terms of shocks to the economy – but I can give businesses the confidence in this budget we have wiped the slate clean, we will never have to do a budget like this again.”