Darren Jones comments on the National Insurance rise
Britain’s biggest pubs, hotels, and restaurants have told Rachel Reeves they face being forced to close their sites and make “drastic” job cuts as a result of her tax grab on employers.
More than 200 hospitality bosses wrote to the Chancellor to warn her sharp increases in National Insurance contributions (NICs) were “unsustainable” and would result in venues closing down and slashing jobs within a year.
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Ms Reeves announced last month an increase in NICs paid by employers from 13.8% to 15%. The threshold at which employers become liable to pay the tax also fell from ￡9,100 to ￡5,000 per year. Both changes will come into effect in April next year.
The letter, organised by trade body UKHospitality, said the changes would cost the sector an estimated ￡3.4bn annually.
Among the signatories are JD Wetherspoon, headed by prominent Brexiteer Tim Martin, Wagamama owner The Restaurant Group, Young’s, and Whitbread, owner of Premier Inn, the UK’s largest hotel chain.
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Wetherspoons boss Tim Martin and Chancellor Rachel Reeves. (Image: GETTY)
It came as Chief Secretary to the Treasury Darren Jones told the BBC’s Laura Kuenssberg: “Bigger businesses are more able to burden some of the contributions we need to make to the state”.
Asked whether that meant that big business had to “suck it up”, the Treasury minister replied: “Well, look, there are measures more broadly in the Budget, which we think are good for business, and good for growth, and good for the economy.
“But on tax contributions, yes, it’s been designed in that way.”
In the letter to Ms Reeves, Kate Nicholls, chief executive of UKHospitality, said: “We recognise the fiscal and economic challenge that you face: you are steering the economy at a moment of profound difficulty, and you have our support in doing so.
Pubs could be forced to make job cuts, Rachel Reeves has been warned. (Image: Getty)
“However, the changes to the NICs threshold are not just unsustainable for our businesses, they are regressive in their impact on lower earners and will impact flexible working practices which many older workers and parents rely upon.”
The letter’s signatories warned that the threshold change was particularly damaging given the hospitality sector’s reliance on part-time and low-earning employees.
They said many staff members would be dragged into the tax bracket for the first time and estimated the resulting cost could be four times higher than the change in the headline rate.
The letter also branded the tax “regressive”, with National Insurance contributions for a part-time worker on minimum wage rising by almost 75%, compared to just 13.6% for a person earning ￡100,000.
It added: “Lower earners’ wages will rise more slowly as a result, and some jobs on the minimum wage will become unviable.”
The hospitality chiefs warned that companies could not pass the higher costs onto customers, whose rising living costs have already hit.
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They wrote: “Instead, many businesses would have to reconsider investment and drastically cut jobs and reduce the hours of team members.
“Without action, many businesses will be forced to reconsider their growth plans, and many smaller venues may be at risk of closure, risking future job creation in communities up and down the country.”
Ms Reeves has faced a fierce backlash from businesses over her Budget tax increases amid fears they will add hundreds of millions of pounds in costs.
The Chancellor has defended the tax raid, insisting the burden fell on employers rather than working people.
However, the Office for Budget Responsibility (OBR) has warned that these costs will be passed on to workers through lower salary increases and higher prices.
Sainsbury’s and BT are among the major companies warned of price increases as they look to balance their books in the face of soaring costs.
"The changes to the NICs threshold are not just unsustainable for our business, they are regressive in their impact on lower earners and will impact flexible working."
Our letter to the Chancellor was featured in today's @thetimes ?????? https://t.co/ms0DSo11p2
— UKHospitality (@UKHofficial) November 10, 2024
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In addition to the increase in National Insurance, retailers and hospitality businesses will be forced to grapple with higher labour costs from April after the Government increases the national minimum wage from ￡11.44 to ￡12.21 an hour.
The hospitality bosses urged Ms Reeves to create a new employer National Insurance band from ￡5,000 to ￡9,100 with a lower rate of 5% or to implement an ？exemption for lower band taxpayers working fewer than 20 hours per week.
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A Treasury spokesman said: “With our public services crumbling and an inherited ￡22bn fiscal black hole from the previous government, we had to make difficult choices to fix the foundations of the country and restore desperately needed economic stability to allow businesses to thrive.
“More than half of employers will either see a cut or no change in their National Insurance bills, and to support the hospitality industry, we’re permanently cutting business rates for every shop on the high street from 2026 alongside a 40pc relief on business rates bills next year for thousands of premises.
“This Government is committed to delivering economic growth by boosting investment and rebuilding Britain.”