Budget 2024: National Insurance threat as top economist outlines ‘serious concern’ for small businesses
One of the UK’s top economists has highlighted his “serious concern” for Labour’s Budget, following Chancellor Rachel Reeves’s announcement.
Addressing the Commons today, Reeves set out the Government’s economic plans for Britain, including a freeze on fuel duty, a state pension increase and a VAT raid on private schools.
Among the measures set out by Reeves, the Chancellor confirmed the decision to increase National Insurance contributions for employers.
Detailing the announcement to MPs, Reeves declared: “So in today’s Budget, I am announcing an increase in employers’ National Insurance contributions.
“We will increase the rate of employers’ National Insurance by 1.2 percentage points to 15 per cent from April 2025, and we will reduce the secondary threshold, the level at which employers start paying National Insurance on each employee salary, from £9,100 a year to £5,000.”
Delivering his verdict on the increase, economist Justin Urquhart Stewart warned of the “serious concerns” the increase may cause for British businesses, particularly small and independent businesses.
Discussing the plan, Stewart told GB News: “Look at the funding – not just the amount, but actually the cost of the funding.
“Bear in mind, actually, over the past few years, our cost of funding has actually been coming down quite effectively now so far.
“But we can see if we look at, say, some of the forward mortgage rates and things like that, that’s heading the other direction. It’s going to have to try and actually get some confidence here that there’s going to be growth.”
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Offering insight into the “real area of growth”, Stewart highlighted that in recent years under the Tory government, small businesses have “continued to grow” at a positive rate.
However, following the plans to increase National Insurance, Stewart warned: “We’ve seen over the past few years, the great success of Britain has been the growth of small companies and small companies employing people.
“And I’m afraid they will be hit by the National Insurance increase. Employing one or two people, actually that extra National Insurance will be the question as to whether you are going to take that on as an employer.”
He added: “The chances are, as a small business, you can’t.”
Offering a worst case scenario for small businesses, Stewart explained that the increase may mean business owners “may not be able to take on anyone at all”.
Stewart told GB News: “Maybe they are just going to say, I can’t employ you at all.
“But it’s going to be interesting to see how that balance works out – to a very small business, they will certainly be frightened by that one. And that, I think, is certainly a serious concern.”