Top business group urges Healey to cut NICs to ‘solve Neets crisis’
One of Britain’s most influential business bodies has urged Chancellor John Healey to cut taxes for employers at the Budget in order to “solve” the crisis facing Neets, who are young people not in employment, education or training.
In a report published on Tuesday, the Confederation of British Industry (CBI) said Britain’s youth unemployment crisis was the “symptom of a wider cost of doing business problem”, with more than a million young people currently classed as Neet.
The lobby group called on Healey to cut employers’ national insurance contributions (NICs), using the period before the Autumn Budget to design the reduction “for maximum impact”.
It suggested that the Chancellor could extend a NICs exemption to workers under the age of 25, though a policy would be “unlikley to have a material impact on hiring”.
The CBI’s report also suggested that Healey cut the headline NICs rate from 15 per cent to 14 per cent.
Researchers refused to say how a proposed tax cut for employers would be funded. However, the group admitted that a cut of about one per cent to the 15 per cent NICs rate imposed on employers would cost up to £9.8bn while raising the salary threshold where firms begin to pay the tax by £1,000 would cost about £3.9bn.
“Young people have a tremendous amount to offer, yet too many are locked out of the labour market.”, Rain Newton Smith, the chief executive of the CBI, said.
“The same challenges that are holding back growth are hurting young people and their ability to enter the labour market. For it to work, growth must be at the heart of the youth employment strategy.”
NICs and regulation hamper employers
Surveys conducted by the CBI have revealed businesses’ frustration with the tax burden after former Chancellor Rachel Reeves’ Budget in 2024 increased costs for firms across the private sector.
The youth unemployment rate has risen under Labour to above 16 per cent. An independent review on Neets by the former health secretary Alan Milburn said the crisis cost the UK economy about £125bn a year as benefits spending on young people outpaced expenditure on employment and training.
Higher NICs, increases to the national living wage, new costs relating to the Employment Rights Act and wider pressures from energy bills and borrowing were hampering recruiters, according to the report.
The CBI said firms were having to deal with cost pressures over planning an expansion of headcount, leaving fewer entry-level roles for school and college leavers.
The report also made a series of demands on workers’ rights after the Employment Rights Act came into force.
Industry representatives called for a 52-week reference period for guaranteed hours contracts under the Employment Rights Act and a “low hours” threshold of no more than eight hours a week in order to ease the risk of fewer job opportunities being offered.
The Treasury has been approached for comment.