Employers face “difficult decisions” as a result of Government moves to increase their national insurance contributions (NICs), according to a Treasury minister.
James Murray’s remarks came as he defended legislation designed to introduce the main tax rise in the Labour Government’s autumn budget from April 2025, amid Tory warnings that the policy will see “50,000 jobs destroyed”.
Measures contained in the National Insurance Contributions (Secondary Class 1 Contributions) Bill include increasing the rate of employers’ NICs by 1.2 percentage points to 15%, with payments starting when an employee earns £5,000, down from the current £9,100.
The Bill cleared the House of Commons on Tuesday evening after MPs voted 354 to 202, majority 152, in favour of giving it a third reading.
This Bill seeks to put into law one of the toughest decisions we made at the budget in October
Mr Murray told MPs: “This Bill seeks to put into law one of the toughest decisions we made at the budget in October.
“We recognise that there will be impacts on employers as a result of the changes, with employers themselves facing difficult decisions.
“It will implement a difficult but necessary decision that, along with others, is critical to raising the revenue needed to fix the public finances, to get public services back on their feet and to restore economic stability.”
The Treasury estimates the policy could raise £25.7 billion a year.
But the Office for Budget Responsibility (OBR) believes the actual amount of money generated for the Exchequer will be around £16.1 billion by 2029-30 as firms curb wage rises, cut hours and reduce profits while public sector employers get compensation in their budgets for the change.
The Government has repeatedly argued the changes stick to Labour’s manifesto commitment of not increasing income tax, VAT and national insurance on employees, although this has claim has been doubted by the Opposition.
This is not a Bill, it's a Shakespearean tragedy. It is the Hamlet of our age
Shadow chancellor Mel Stride described the proposals as a “calamity” for businesses across the country and claimed Labour is “plunging” people into the “tepid bath of managed decline”.
He said: “This is not a Bill, it’s a Shakespearean tragedy. It is the Hamlet of our age.
“While the party opposite was tipping the poison into the ears of the electorate, they were also assuring them in their manifesto that they would do nothing with national insurance, and look what they have done.”
Mr Stride said the changes will “hit inflation”, adding: “Mortgages will be higher, living standards will be lower, wages will be driven further down.”
He went on: “We will see 50,000 jobs destroyed, particularly among our younger people. We will see growth impacted.”
Ahead of the third reading vote, MPs raised concerns over the impact of the policy on charities, hospices and GP surgeries.
Labour MP Gareth Snell (Stoke-on-Trent Central) called on the Government to “mitigate some of the worst aspects” of the Bill and ensure that charities and hospices are resourced “efficiently”.
Speaking for the Liberal Democrats, Pippa Heylings accused the Government of “bringing an uncertainty” to GPs “at a critical time”.
She added that primary care providers “who form the foundation of our healthcare system, are being undermined by this tax increase”.
Intervening, Ulster Unionist Party MP Robin Swann (South Antrim) said this is a “significant problem” in Northern Ireland “where we’ve already seen a high number of GP practices actually returning their contracts”.
Ms Heylings said four “much-loved” family doctors in her constituency of South Cambridgeshire had returned their contracts, adding: “The hikes in the national insurance employers’ contributions has just driven them over the edge.”
Labour MP Stella Creasy (Walthamstow) tabled an amendment which proposed a review into what would happen if the Government was to bring more childcare providers into the employment allowance programme, which could help them reduce their national insurance liabilities.
This amendment was not moved to a vote.
The Bill will undergo further scrutiny in the House of Lords at a later date.
