Launched a £25 billion raid on employers' National Insurance, breaking a manifesto pledge not to raise a levy she previously called a 'jobs tax';An entrepreneur has broken down on live television over the hike in National Insurance which businesses say will force them to cut jobs, reduce salaries and put up prices.
In a post-Budget briefing, the economists pointed out that employers with large numbers on relatively low wages will be disproportionately affected. He was left 'shell shocked' at the policies announced by Chancellor Rachel Reeves in her Autumn Budget yesterday In the most Left-wing Budget for decades, Labour pushed taxes to their highest level in history and relaxed government borrowing rules to finance a massive spending spree.
'I am just flabbergasted. 200 people from our industry wrote a 17-page paper that went into the ministry. The IFS pointed out that the proportional costs of staff would be increased much more for low earners At a briefing this morning, IFS director Paul Johnson said the extraordinary package unveiled yesterday had made the state bigger, predicting it would not shrink again amid a 'decade of higher taxes'.And there was a warning that despite the huge increases in public spending, the finances still looked 'shaky'.
'Instead the employers who are going to be paying the most are those who have a large staff.. particularly larger employers who employ a lot of workers on lower wages. 'The total impact for our business is a £1.7million increase in staff costs and we don't make that in profit. The Chancellor hiked employer national insurance contributions by 1.2pc to 15pc from April next year.
But, in a furious backlash at the move, senior industry figures said it would bring growth to a 'grinding halt', force companies to cut salaries, reduce hiring and hike prices to cope with the additional cost of employment. The £25billion raid on employers' NICs came as part of a wider £40billion 'tax bomb' unveiled by the Chancellor in her first Budget.
Becky Lumsden, 49, described the budget as an 'extinction-level event' for her business as it imposed a £300,000 increase in staffing costs on her 23 beauty salons. Reacting to the Budget, she said: 'It's a complete disaster for our business. It's going to cost our business about £300,000 to implement changes that the Chancellor announced in her Budget.
'I feel like going to the government and saying 'here's my company run it for me'. It's very disheartening. While Lawrence Barton, who owns three bars in the centre of Birmingham, labelled it a 'dark day' for the hospitality industry that will spell the end of many businesses. Sean Finnegan, 49, says the rise in employers' National Insurance Contributions will cost his business an extra £1,500 a month
'This type of extra cost will have a detrimental impact on many businesses. It is not a smart strategy to fix something which will lead to more funding holes. 'It's a substantial monthly increase,' he said. 'It's going to affect the sector overall as costs continue to spiral.'It just shows the nature of the government here and they just won't stand up to the real issues and expect the private sector to bear the biggest brunt.'
Alisa Zotimova, 44, revealed she had to shelve plans to grow her business, which involved hiring new staff members, because of the increase in employers' NICs. 'I was planning to grow the business and up the revenue by hiring more people but I don't think I can do this anymore.' Under the Conservatives she received a heavy 75 per cent discount on £9,000 business rates, but will now have to pay an extra £3,150 as the rate relief is slashed to 40 per cent.
She added: 'You hope all the hard work will pay off at the end of the year with increased profits, but this rise would mean it would be wiped out. What we earned last year would remain nothing if costs went up – it just wouldn't be worth it. 'It feels like we're up against it. I feel like there are fewer incentives to contribute something different on the high streets.'You feel like you're making progress, but then you get these huge changes that take chunks of money away from you, and you think, 'Why do I bother?' ''This is why the high street is dying,' she said.
Carol Evans , a 56-year-old entrepreneur who has owned multiple businesses over the last 20 years, said her greatest concern is the change in the employers' National Insurance 'For a small business, these additional costs all add up and hit hard, and it makes it harder to support the staff who keep things running smoothly.'
Combined with VAT at 20 per cent, which post covid was only supposed to be a temporary measure, the increase in National Insurance is another problem on top of that. 'At this rate, we'll get to £10 pints within 3 years. To cope with the low customer spending, higher taxes, higher business rates, increase in the minimum wage, and increase in national employee contributions, we'll have to hike prices in January and then again before the summer.
'Larger small, and medium-sized, businesses will struggle with the rises on employer national insurance on top of the large costs from the Government's employment law plans. 'The hike in NICs alongside other increases to the employer cost base will increase the burden on business and hit the ability to invest and ultimately make it more expensive to hire people or give pay rises,' she added.
'Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.' 'They said there would be no major tax surprises. People aren't stupid. If you batter employers for £25bn, that will hit company's costs and impact workers and the economy.'
'Employers will need to shoulder the cost and there is a very real worry that it will ultimately hit workers through lower wage growth or less hiring.' 'Whether that's lower pay rises for staff, cuts to future hiring or businesses passing on cost increases to customers.'In her speech, Reeves has vowed to take a 'penny off the pint in the pub' as she slashed draught duty by 1.7 per cent.
Budget 2024: Key points Rachel Reeves became the first female chancellor to present a Budget today as she presented Labour's first government economic plan for 14 years.Advertisement The Chancellor's move to raise alcohol duty by RPI has been branded 'a real kick in the teeth' by the wine and spirit sector, following punishing duty increases last year which saw booze hit with the largest tax rise in almost 50 years.
Miles Beale, the association's chief executive, said: 'We simply cannot understand why Government has said they are trying to protect income and in the next breath raising alcohol duty in a move that is totally counterproductive.