PM defends employer tax hike as retailers warn of ‘inevitable’ job losses

The Prime Minister said the previous Tory government had “refused to take a single difficult decision” as he defended the move to increase employers’ national insurance contributions.

More than 70 businesses, including Tesco, Asda and Sainsbury’s, have told Rachel Reeves in an open letter that the changes announced in last month’s Budget mean price hikes are a “certainty”.

Asked whether he still had confidence in the Government’s financial plans and by extension the Chancellor, Sir Keir told a press conference at the G20 summit in Brazil: “Absolutely.

“We have to stabilise the economy, we have to deal with the £22 billion black hole, and we need to invest in the future of our country.

“The reason we got into such a mess over the last 14 years is because the last government refused to take a single difficult decision.”

The PM accused Tory leader Kemi Badenoch of still being “in the same camp,” wanting “all the benefits” of investment in public services “but she doesn’t want to raise any of the money to pay for it”.

“That’s exactly why we got into this problem in the first place – unfunded commitments. We’ve ended that, we’ve turned the page,” he said.

Meanwhile, governor of the Bank of England Andrew Bailey warned retailers were “right” to warn of potential job cuts following the Budget changes.

“I think there is a risk here that the reduction in employment could be more. Yes, I think that’s a risk,” he said.

Ms Reeves revealed a £25.7 billion change to employers’ national insurance contributions (NICs) in the budget, which would increase the rate of the tax and the threshold at which firms must pay.

Businesses have said the raft of Budget policy measures, which also included packaging levies and increases to the national minimum wage, will cost the industry £7.06 billion a year.

The letter, arranged by the British Retail Consortium, was also signed by household names including Amazon, Aldi, Boots, B&Q, Currys, Greggs, JD Sports, Marks & Spencer, Next and Primark.

The letter reads: “We appreciate Government’s focus on improving the fiscal situation and investing in public services; we also recognise the role businesses have in supporting this.

“But the sheer scale of new costs and the speed with which they occur create a cumulative burden that will make job losses inevitable, and higher prices a certainty.”

The group said they would “welcome” the chance to meet Ms Reeves and recommended potential changes including phasing the introduction of the national insurance lower earnings threshold, delaying timelines for packing levy implementations and revisiting business rates proposals announced in the Budget.

“By adjusting the timings of some of these changes, the Government would give businesses time to adjust and greatly mitigate their harmful effects on high streets and consumers,” it read.

Asked if job losses were simply a price that had to be paid to fix the foundations of the economy, Sir Keir said: “We took a number of difficult decisions in the Budget and ensured that the pay slip in people’s pockets is not affected.

“They will not be paying more (in tax) and they’ll see that month on month in their pay slip.

“So far as the numbers affected it is important, I think, to factor in the protection that we put in place for employers, particularly small employers, so half of employers will either see no change to their NICs, or they’ll be paying less.”

It comes after warnings by a number of bosses across the sector in recent weeks.

Sainsbury’s boss Simon Roberts said earlier this month that the tax hikes would mean higher inflation for shoppers, while Asda warned that it would face an extra £100 million in costs thanks to the Budget.

Sentiments were echoed by another joint letter organised by UK Hospitality earlier this month, with some bosses revealing minimum wage jobs could become “unviable” as a result of the new national insurance contributions threshold.

But the GMB Union hit back at the retailers’ job cut warnings, branding them “utterly pathetic”.

Nadine Houghton, GMB national officer, said: “Multibillion-pound businesses pleading poverty because they’re being made to pay more to support public services is utterly pathetic.

“Most of these companies’ fortunes are already subsidised by the taxpayer – they pay very low wages which then have to be topped up by in-work benefits.

“It’s only right that they should now contribute a bit more to rebuilding our country.”

The Office for Budget Responsibility believes the equivalent of about 50,000 jobs could be lost as a result of the hike in NICs.

Ministers have also come under pressure from farmers and opposition parties to scrap its changes to agricultural inheritance tax, which they warn could hit family farms hard.

The National Farmers’ Union (NFU) is holding a mass lobby of MPs with 1,800 of its members on Tuesday to urge backbenchers to stand up to the Government’s plans to impose inheritance tax on farms worth more than £1 million.