Key facts
- The CBI urged Chancellor John Healey to cut employers' National Insurance Contributions (NICs).
- The proposal aims to address the crisis of young people not in employment, education, or training (Neets).
- The CBI suggested cutting the headline NICs rate from 15% to 14% or extending exemptions.
- The youth unemployment rate has risen to over 16%.
- The Neet crisis is estimated to cost the UK economy £125bn annually.
- Businesses cited increased NICs, national living wage, and Employment Rights Act costs as challenges.
One of Britain's leading business organizations, the Confederation of British Industry (CBI), has called on Chancellor John Healey to implement tax cuts for employers in the upcoming Budget. The CBI argues that reducing employers' National Insurance Contributions (NICs) is crucial to address the growing crisis of young people not in employment, education, or training (Neets) and to stimulate economic growth.
The CBI's report highlights that the high cost of doing business in the UK is a primary factor contributing to the youth unemployment crisis, with over a million young people currently classified as Neet. The lobby group specifically suggested that Healey consider cutting the headline NICs rate from its current 15% to 14%, or potentially extending NICs exemptions to workers under the age of 25, though the latter is deemed unlikely to significantly impact hiring.
While the CBI did not specify how such tax cuts would be funded, the report acknowledged that a 1% reduction in the NICs rate could cost up to £9.8 billion, and raising the salary threshold for employer NICs by £1,000 would cost approximately £3.9 billion. CBI Chief Executive Rain Newton Smith emphasized that growth must be at the core of any youth employment strategy, stating that "young people have a tremendous amount to offer, yet too many are locked out of the labour market."
Businesses have expressed considerable frustration with the tax burden, particularly following the 2024 Budget introduced by former Chancellor Rachel Reeves, which reportedly increased costs across the private sector. The youth unemployment rate has reportedly climbed above 16% under the current Labour government. An independent review by former health secretary Alan Milburn estimated that the Neet crisis costs the UK economy around £125 billion annually.
The report also pointed to other pressures on businesses, including higher NICs, increases to the national living wage, new costs associated with the Employment Rights Act, and rising energy bills and borrowing costs, all of which are hindering recruiters. These cost pressures are forcing companies to reconsider expansion plans, leading to fewer entry-level positions for school and college leavers.
In addition to tax cut proposals, the CBI made several demands concerning workers' rights following the implementation of the Employment Rights Act. Industry representatives are seeking a 52-week reference period for guaranteed hours contracts and a "low hours" threshold of no more than eight hours per week, arguing these changes would mitigate the risk of reduced job opportunities.